Hi All ! Need help with determining when should I book TI Allowance. Below are is a sample of our situation:
Company X renting an office. Total lease periods 86, monthly $1,000, straight-line over 86 periods.
Move in date after completion of tenant improvement: Month 5
We had a tenant allowance of $10,000, which is eligible for reimbursement after the project is completed and we submit the documents ( Month 5)
Should the TI be recognized at Month 5, and amortized over the remaining life of the lease (81 months) or over the full life of the lease( 86 months).
Method 1: Recognized over the life of the lease 86 periods
Month 1 - Month 86 :
Dr Rent 1,000
Cr. Cash 1,000
Dr. Deferred Rent 116.28
Cr. Rent 1 116.28
Month 5: Dr. Cash 10,000
Cr. Deferred Rent 10,000
Method 2: Recognized at reimbursement (81 periods)
Month 1- Month 86
Dr Rent 1,000
Cr. Cash 1,000
Month 5: Dr. Cash 10,000
Cr. Deferred Rent 10,000
Month 5-Month86
Dr. Deferred Rent 123.46
Cr. Rent 1 123.46
The lease was entered in Q4'17, so the first three months are in 2017 creating a timing issue for our audit/. Please provide relevant guidance. I was not able to find timing on ASC840.
Thanks a lot!
Company X renting an office. Total lease periods 86, monthly $1,000, straight-line over 86 periods.
Move in date after completion of tenant improvement: Month 5
We had a tenant allowance of $10,000, which is eligible for reimbursement after the project is completed and we submit the documents ( Month 5)
Should the TI be recognized at Month 5, and amortized over the remaining life of the lease (81 months) or over the full life of the lease( 86 months).
Method 1: Recognized over the life of the lease 86 periods
Month 1 - Month 86 :
Dr Rent 1,000
Cr. Cash 1,000
Dr. Deferred Rent 116.28
Cr. Rent 1 116.28
Month 5: Dr. Cash 10,000
Cr. Deferred Rent 10,000
Method 2: Recognized at reimbursement (81 periods)
Month 1- Month 86
Dr Rent 1,000
Cr. Cash 1,000
Month 5: Dr. Cash 10,000
Cr. Deferred Rent 10,000
Month 5-Month86
Dr. Deferred Rent 123.46
Cr. Rent 1 123.46
The lease was entered in Q4'17, so the first three months are in 2017 creating a timing issue for our audit/. Please provide relevant guidance. I was not able to find timing on ASC840.
Thanks a lot!