ASC 842: Partial Termination of Our Office Lease

Precision Industrial is giving back a portion of its office space — and that partial termination requires a specific accounting response under ASC 842. In this video, we work through it from start to finish. We cover: The facts: Precision is returning part of its leased office space to the landlord, reducing the scope of the lease, and the contract is modified accordingly Applying ASC 842-10-25-13: calculating the proportionate reduction in the right-of-use asset based on the scope reduction Remeasuring the lease liability for the modified terms — fewer payments, different amounts, potentially a new discount rate Recording the partial termination entry: reducing the lease liability, reducing the ROU asset proportionately, and recognizing any gain or loss for the difference Reassessing the discount rate and lease classification as of the modification date — required for any partial termination Updating the workbook: archiving the prior schedule, setting up the revised lease with the new payment stream, and confirming the workbook check By the end of this video, you'll understand: How a partial termination is accounted for under ASC 842 How to calculate the proportionate ROU asset reduction and the resulting gain or loss How to update the workbook and confirm the accounting is correct after a partial termination With terminations complete, we'll turn to short-term leases in the next episode. 👉 Visit us at https://intellicasts.com to explore more resources and courses.