Lessor Accounting
Related terms
Category
IFRS 16
Lessor accounting refers to the accounting treatment for entities that own assets and lease them to others. Under ASC 842, lessors classify leases as sales-type, direct financing, or operating. Under IFRS 16, lessors classify leases as finance or operating, largely unchanged from IAS 17.
Why it matters
Lessor accounting was largely unchanged by ASC 842 and IFRS 16; the major changes primarily affected lessee accounting. However, lessors must still properly classify leases and apply the correct recognition and measurement model. Sales-type leases (ASC 842) result in derecognition of the asset and recognition of a net investment, while operating leases continue to recognize rental income.
How Arvexi handles this
While Arvexi primarily serves lessees, the platform supports sublease accounting where the intermediate lessee acts as a lessor. The platform handles both the head lease (lessee perspective) and sublease (lessor perspective) accounting simultaneously.