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Real Estate Portfolio Management / Lease Administration / Lease Portfolio / Lease Classification Wizard

How to Classify Subleases

Lessors use a distinct accounting model for lease arrangements, and the head (parent) lease must be evaluated separately for classification from the sublease; for example, a head lease could be classified as financing, whereas the sublease could be classified as operating. The combination of head lease and sublease classification can drive very different accounting outcomes, which need to be captured. Additionally, the sublease may have a different discount rate than the head lease. A sublessor must also evaluate whether or not they have been relieved of primary obligation of the head lease; if that is the case, the lessee must de-recognize their original ROU asset and lease liability, with the difference recorded to the P&L.

ARCHIBUS designates a lease as a parent lease or sublease using the Lease/Sublease field of the Leases table (ls.lease_sublease). This schema provides for recording subleases separately from leases. Since in ARCHIBUS subleases are recorded separately from leases, the finances associated with them are also separately recorded.

1. Enter the lease using the Add/Edit Wizard or the Lease Portfolio Console. Both are available on the Process Navigator at Real Estate Portfolio Management / Lease Administration / Lease Portfolio.
2. Use the Lease/Sublease field to indicate that the lease is a sublease. The sublease will now be stored as a distinct record in the Leases table and so you can track financial data specific to this sublease.
3. Classify the sublease using the Lease Classification Wizard, as per standard procedure.