Lease Accounting & Valuation
Lease accounting has evolved significantly. Today, lessees must recognise right‑of‑use (ROU) assets and lease liabilities on the balance sheet under standards such as IFRS 16 and ASC 842. Proper valuation of these components is essential—not just for compliance, but for accurate financial reporting, disclosures, and decision making.
At Synpact Consulting, we specialize in lease accounting valuation services — modeling ROU assets, discounting lease liabilities, assessing modifications and impairments, and delivering audit‑ready documentation across multiple accounting regimes.
Why Choose Synpact for Lease Accounting Valuation
- Standards Proficiency: Deep knowledge of IFRS 16, ASC 842, (and legacy ASC 840), and local GAAP.
- End‑to‑End Modeling: From lease identification & classification to valuation, impairment & modifications.
- Audit‑Grade Deliverables: ROU asset schedules, liability roll‑forwards, working papers, and footnote disclosures.
- Robust Assumptions: Discount rates, lease terms, residual values, renewal options, escalations.
- Modification & Reassessment Support: Model lease changes, remeasurements, early terminations.
- Impairment & Revaluation Analysis: Review for impairment triggers and fair value remeasurement.
- Cross‑Industry Experience: Real estate, equipment leases, fleet, technology, and more.
Our Lease Accounting Valuation Services
Lease Classification & Scope Assessment
Determine whether a contract is (or contains) a lease.
Assess classification (finance vs operating) under relevant standards.
Initial Measurement & Recognition
Compute present value of lease payments to measure lease liability.
Determine ROU asset value, inclusive of initial direct costs and lease incentives.
Discount Rate & Assumptions
Derive incremental borrowing rate or implicit rate.
Factor in escalation, renewals, termination options, residual guarantees.
Subsequent Measurement & Reassessment
Amortization / depreciation of ROU asset.
Interest on lease liability and lease payments.
Remeasurement for changes in lease terms, modifications, or reassessments.
Lease Modifications, Terminations & Reassessments
Model amendments, scope changes, or early terminations.
Remeasure valuation and adjust ROU and liability accordingly.
Impairment & Revaluation of ROU Assets
Assess triggering events for impairment of ROU assets.
Perform fair value remeasurement (if needed) and record impairment loss.
Disclosure & Reporting Support
Footnote disclosures: maturity analysis, discount rates, lease terms, residual guarantees.
Roll‑forwards of ROU assets and lease liabilities.
Audit support for reviewer queries.
Process & Workflow
- Engagement & Scope Definition – Review lease contracts, accounting regimes, client objectives.
- Data Collection & Lease Inventory – Gather lease terms, payment schedules, incentive agreements.
- Modeling & Initial Valuation – Build valuation models for ROU assets & lease liabilities.
- Review & Sensitivity Testing – Test assumptions, run scenario analyses.
- Remeasurements & Modifications – Handle lease changes, adjustments, or reassessments.
- Impairment Testing – Conduct impairment review if indicators exist.
- Deliverables & Disclosures – Final report, schedules, audit documentation, footnotes.
Industries & Use Cases
Industries:
- Real estate & property leasing
- Equipment, machinery & industrial leases
- Technology & telecom (e.g. data center leases)
- Automotive / fleet leasing
- Retail store leases & franchise operations
Use Cases:
- First‑time adoption of IFRS 16 / ASC 842
- Annual / periodic lease remeasurements
- Lease modifications or contract renegotiations
- Impairment assessment of ROU assets
- Audit & regulatory review readiness
- M&A due diligence involving leased assets
Frequently Asked Questions (FAQs)
Q: What is a Right‑of‑Use (ROU) asset?
A: An ROU asset represents a lessee’s right to use an underlying asset over the lease term, and is measured at initial cost less depreciation and impairment.
Q: How is the lease liability computed?
A: It is the present value of future lease payments, discounted using the interest rate implicit in the lease (if determinable) or the lessee’s incremental borrowing rate.
Q: How often must leases be reassessed or remeasured?
A: When lease terms or payments change (renewals, termination, escalation), or in events of modifications or reassessments, the lease liability and ROU asset must be remeasured.
Q: How do you handle impairment of ROU assets?
A: If there is an indication that the ROU asset may be impaired, we assess recoverable amount and recognize impairment losses following applicable standards.
Q: What disclosures are required under lease accounting?
A: Disclosures include a maturity schedule of lease payments, weighted average discount rate, lease terms, residual guarantees, and roll‑forward reconciliations of ROU assets and lease liabilities.
Call to Action
Need precise, audit‑ready lease accounting valuations? Let Synpact Consulting help you navigate the complexities of lease accounting — from initial recognition to modifications and impairment. Contact info@synpactconsulting.com to request a consultation or sample deliverables.