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Use this type when a modification reduces the scope of the lease and the remaining lease continues, for example giving back one floor of a multi-floor lease. Complete the wizard with the effective date, the remaining payments for the reduced space, and the updated discount rate. How Spacebase calculates the partial termination. ASC 842-10-25-13 requires you to decrease the carrying amount of the ROU asset on a basis proportionate to the partial termination and recognize the difference between the decrease in the lease liability and the decrease in the ROU asset as a gain or loss. Spacebase applies the proportion based on the change in the lease liability:
  1. Remeasures the lease liability for the remaining payments at the discount rate you enter.
  2. Reduces the ROU asset by the same proportion: new ROU asset = previous ROU asset × (new lease liability ÷ previous lease liability), then adds any new initial direct costs, prepaid rent, or incentives.
  3. Books the difference between the liability decrease and the ROU asset decrease to lease gain or loss.
  4. Recognizes the remaining single lease cost straight-line over the remaining term.
ASC 842 does not prescribe how to measure the proportion. Practice accepts either the change in the lease liability, which Spacebase uses, or the change in the right of use, such as square footage given back. If your policy uses the right-of-use basis, calculate the ROU asset reduction outside Spacebase and record it through Update existing accounting lease using the ROU adjustment field on the balances step. Spacebase offsets that adjustment to lease gain or loss.
Spacebase offers this option for ASC 842 operating leases only. For finance leases, and for IFRS 16 and GASB 87 leases, use Update existing accounting lease with the ROU adjustment field to record the proportionate decrease. A rent reduction with no change in the underlying asset is not a partial termination. It is a change in consideration only, so record it with Update existing accounting lease and the ROU asset absorbs the full liability change without a gain or loss.