Using Lease Administration Software to Manage Your Subleases

The new ASC 842 and IFRS 16 lease accounting standards move leases from the footnotes to the corporate balance sheet. We do this to provide more transparency for investors.

For many lease admins and real estate teams, mining for lease data throughout the company is a massive undertaking. Lease management is often a decentralized process that lacks standardization. Which can easily lead to human error and missed critical dates.

When collecting and classifying lease data, it’s also important to note how the rules apply to subleases. And it's important to have not just a reliable lease administration software, but the best lease administration software available.

FASB and IASB may disagree on some topics. However, both agree that intermediate lessors should handle different types of leases in different ways. When generating reports, we view the head lease and sublease as two separate leasing documents.

For example, if a lessee signs a lease agreement for an entire office building, then subleases one floor of the building to another tenant, the original lease and the sublease will be shown as two different contracts when you're lease tracking.

It should not offset lease income/expenses related to a head lease and a sublease. Unless the intermediate lessor recognizes sublease income as revenue and acts as an agent. The FASB and IASB agree on this point.

Along the same lines, it should not offset lease assets/liabilities from a head lease and a sublease that does not meet IFRS and GAAP financial instruments requirements for offsetting.

The Boards differ slightly in lease classification guidance. The FASB decided intermediate lessors should determine the classification of the sublease regarding the underlying asset. The IASB decided intermediate lessors should classify subleases regarding the ROU asset from the head lease.

Learn more about how CoStar Real Estate Manager lease management software is the smart choice. This solution makes it easier to do routine accounting functions with increased accuracy, such as lease classification testing, tracking workflow and creating ad hoc reports. You'll save time, reduce risks, reduce lease costs and you'll never miss a critical due date again.