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What’s the issue?

The COVID-19 pandemic has changed working practices, driving an increase in home- and hybrid-working models. Some tenants are looking to either exit or renegotiate their real estate leases.

Deciding to vacate or sub-let office space potentially indicates impairment, so companies need to assess the potential impacts for their financial reporting now.

Getting into more detail

Changes in the expected use of office space could have significant accounting consequences. For example, the right-of-use (ROU) asset in a lease arrangement could be impaired or there could be a change in its estimated useful life.

Actions for management to take now

Companies need to assess the potential impacts for their financial reporting now, because a decision to vacate or sub-let property is a potential indicator of impairment.

To help with this assessment, we provide insight and practical guidance in our guide to Testing leased office space for impairment, (PDF 728 KB) using ten key questions that companies might ask.
 

References to ‘Insights’ mean our publication Insights into IFRS