USA Ground lease accounting - lessor


KPT

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hello everyone,

If company A owns land and leases it to company B , without purchase option. Company B constructs a building on the land using its own funds.

Question: does company A record an asset on its books? ( I know they don’t own it but when the lease expires, tenant can’t pick up the building and take with them)

Is there a specific guidance by ASC on this that you can please refer me to?

Appreciate your help.
 
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Drmdcpa

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LHI often belong to tenant unless removal of the LHI would significantly alter the property. In such cases LHI does not become property of the lessor until such time that lessee vacated the property.

The example I often give is a pizza oven. They can be massive and seriously alter the structure when removed. Thus upon the pizzeria closing or changing locations, the oven is often left and becomes property of the lessor. But it could actual turn into a liability if it needs to be removed.

Sometimes lessor will build to suit lessee,
in such instances LHI belongs to lessor unless otherwise contracted.
 

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