Weathering the Storm Part 8: Lease Considerations

  |  June 4, 2020

image of a five-story office building

One area that has been heavily impacted by the crisis is the ability of companies to make lease payments. Here are some tips:

  1. Concessions – Companies may see concessions in their leases in the form of payment deferrals, change in the lease term or full or partial payment forgiveness. Companies should evaluate the lease contract as well as the form and type of concession made as there could be different accounting implications.
  2. Lease Contracts – Companies should review the lease contract and determine if it has clauses regarding pandemics, business interruptions and force majeure. Evaluate business interruption insurance that could help during this crucial time.
  3. Discount Rates – evaluate the discount rates of financial leases that have been modified to determine the impact, if any, to the financial statements.
  4. Fair Market Value – evaluate the FMV of financial leases now that there is an estimate that commercial real estate sales will decrease.
  5. Impairment – evaluate if the current situation has significantly impacted the operations of the Company which could lead to an impairment of the leased asset.

These are uncertain times and we can help your company navigate through these topics.