Lease modification considerations

Lease modification, impairment, and abandonment implications of real estate rationalization

To adapt in the changing business environment, CFOs continue to play a critical role in helping C-suites strategically reassess current business structures. Among the areas they have been tasked with is reevaluating where employees may work and to what extent they will rely on the use of brick-and-mortar real estate assets.

The goal of these real estate rationalization programs is a rightsized real estate portfolio that manages costs while supporting evolving business needs. To meet that goal, we have seen CFOs and their teams embark on rationalizations initiatives that fall into four main categories:

• Exiting leased space before the end of the contract term
• Modifying existing lease agreements
• Purchasing or leasing additional space
• Reducing owned space by executing a sale-and-leaseback transaction

Each rationalization initiative has certain accounting implications that may not be fully understood and can introduce unexpected complexities and outcomes. For guidance on these more complex accounting activities explore our executive summary, “Reevaluating your real estate footprint,” and read our full report to go deeper into the accounting nuances.

Finding the right size for your real estate footprint

How CFOs are rightsizing for a remote work world

The current environment has changed the way work gets done. As some companies recognize remote work as a viable long-term option and others are increasing their space to allow for better social distancing, many CFOs are reviewing their organizational real estate portfolios. In a poll* conducted on the March 2021 Deloitte Quarterly Accounting Roundup Dbriefs webcast, a majority of respondents said they were taking action to rightsize their portfolios.