12.4 Lessor’s Accounting for a Sublease
ASC 842-30
35-7 If the original lessee enters into a sublease or the original lease agreement is sold or transferred by the original lessee to a third party, the original lessor shall continue to account for the lease as it did before.
40-3 If the original lease agreement is replaced by a new agreement with a new lessee, the lessor shall account for the termination of the original lease as provided in paragraph 842-30-40-2 and shall classify and account for the new lease as a separate transaction.
In a manner consistent with ASC 840-10-35-10, the lessor should continue to account for the head lease as it did before the execution of the sublease. See Chapter 9 for additional information about the lessor’s accounting model.
In addition, if the original lease is replaced by a new agreement with a new lessee, the lessor should account for the replacement as a termination of the original lease. The lessor should classify and account for the new lease as a separate transaction from the termination of the original lease.