Discard Table Of Contents Lease For Free

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Like other long-term assets, leasehold improvements are capitalized, which means they are recorded as an asset on the balance sheet and then depreciated over the shorter of their useful life or the remaining lease term.

Once the lease ends, the improvements generally belong to the landlord, unless otherwise specified in the agreement. If the tenant is able to take them, they must remove them without any damage to the property.

The right-of-use asset for an operating lease is amortized in a systematic and rational basis by subtracting the liability lease expense from the total lease expense. Finance lease assets are amortized on a straight-line basis.

Lease End or Early Termination ? If the lease ends or is terminated earlier than originally scheduled, the remaining net book value (NBV) of the leasehold improvements ? i.e. the original cost minus the accumulated depreciation to date ? is written off as a loss.