Issue link: https://resources.tangoanalytics.com/i/1529537
Lessee leases acquired in business combinations RSM | 13 Valuation Considerations – Cash Study Background: ▪ Lessee leases 100,000 square feet of empty/unimproved property with rent of $50/square foot ▪ Landlord provides tenant improvement allowance of $40/square foot, resulting in leasehold improvements of $4 million ▪ Lessee is acquired 3 years into the lease, after all improvements are completed ASC 805 considerations ▪ Acquirer must record lease liability, right-of-use asset, and leasehold improvements at fair value ▪ Market rent used to determine the off-market component of the ROU asset should not assume any TIA − If market rent is based off of comparable that include TIA, there ROU asset may be overvalued