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Deferred rent schedule

Hello, My firm recently moved from a old STE to a new STE in the same building. The move date was 11/15/13. My question is what to do with the previous deferred rent schedule for the old suite? We were no longer occupied after 11/15/13 for the old suite. In terms of the accounting treatment, should I reverse the old deferred rent expense and create a new one based on the new lease? Thank you.


Topic Expert
Patrick Dunne
Title: Chief Financial Officer
Company: Milk Source
(Chief Financial Officer, Milk Source) |

I assume you mean that you received an up front reduction of rent on the first lease and from an accounting standpoint you have been "straight lining" rent over the lease term in accordance with GAAP. You will need to read the lease to determine if the first lease somehow rolls into your second lease. If not, you will need to clear your balance sheet to $0 for the first lease. If somehow the two leases are intertwined, the lease will help in prescribing accounting treatment.

Stuart Brown
Title: CFO
Company: Red Robin
(CFO, Red Robin) |

I have the same understanding at Patrick though my experience is more from the landlord than the tenant side. You would only consider blending the remaining straight-line balance into the new lease if you had a lease modification. Since a new suite and likely new terms and new rate, probably a new lease. EY has really good lease guidance - you can search for the lease accounting FRD.

Kevin Roones
Title: Senior Accounting Professional
Company: In-between
(Senior Accounting Professional, In-between) |

Amplifying what has been previously said, you need to examine the underlying documents and determine if you have a new lease (likely) or a modification of your existing lease (less likely).

If you have a new lease, you would need to write-off the remaining deferred rent under the old lease and set up a new deferred rent schedule for the new lease, including any rent holiday, straight-lining of rent expense and any tenant allowance.

If you have any assets set up for capitalized leasehold improvements on the old space you will need to revise their estimated useful lives and recognize an impairment.


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