Sublease
Related terms
Category
General Concepts
A sublease is a transaction in which a lessee (the sublessor) grants the right to use an underlying asset to a third party (the sublessee), while the original lease between the lessee and the lessor remains in effect. Under ASC 842, the sublessor accounts for the original lease and the sublease as separate contracts.
Why it matters
Subleases create a dual accounting obligation for the sublessor: they must continue to account for the head lease as a lessee while simultaneously accounting for the sublease as a lessor. Under ASC 842, subleases are classified by reference to the underlying asset (not the head lease ROU asset), and the sublessor may need to recognize a lease receivable and deferred income.
Subleases are common in corporate real estate, particularly when companies downsize or consolidate office space while their head leases remain in effect.
How Arvexi handles this
Arvexi supports sublease accounting for both the head lease (lessee perspective) and the sublease (lessor perspective). The platform maintains the relationship between the head lease and sublease, ensuring consistent treatment and proper disclosure of sublease income and future sublease receivables.