Early termination can have wide-reaching effects for both parties involved, both in their immediate business dealing and in their overall business reputation, so such action should generally be avoided, if possible. Senior experienced contracts/transactions attorney in the Software Technology space. Also very versed in general corporate legal matters relating to business operations. Post a project in ContractsCounsel’s marketplace to get free bids from lawyers to draft, review, or negotiate early termination agreements. All lawyers are vetted by our team and peer reviewed by our customers for you to explore before hiring.
This was only phone service…no parts were leased.
GAAP Question – Expensing early termination fees
My firm’s practice focuses on ensuring the legalities of commercial transactions and contracts. I am adept at reviewing, drafting, negotiating and generally overseeing policies, procedures, handbooks, corporate documents, and contracts. I have a proven track record of leading domestic and international companies by ensuring they are accounting for early termination of contract functioning in complete compliance with local, federal and international law. The firm’s goal is to simplify the law and provide clients with the confidence and information necessary to make their decisions. For example, a lessee with a struggling business may seek to negotiate lower lease payments or terminate some leases early.
The lessee derecognizes the right of use asset and a lease liability. Any difference between the right of use asset and lease liability value should be recorded in the income statement as a gain or loss. Without the gain/loss calculation, the journals would not balance.
Legal
An early termination agreement can include specifying who is responsible for what costs and liabilities and how any remaining assets will be divided. I wanted to confirm if the treatment is the same under IFRS i.e. amount received/receivable against early termination of the contarct is to be treated as revenue upon agreement to terminate rather than recoganize it over the remaining term of the original contract. The reference you have given above is that of US GAAP. I would appreciate your clarification (any case references / illustrations) on this. And all companies will need to prepare for lease modifications that will take place after transition – a key ‘day two’ aspect of the new world of lease accounting.
In consideration of and as a condition to Landlord’s agreement to terminate the
Lease and all obligations thereunder other than as provided in Section 7 below, Tenant shall pay to Landlord the sum of $976,045.42 (the “Lease Termination Fee”). The Lease Termination Fee less the Deposit shall be paid to Landlord
by wire transfer of immediately available funds within one (1) business day following the Effective Date of this Agreement. Based on the above remeasurement there is a debit to the lease liability of $13,553.14 and the balancing
entry
goes
to the ROU asset.