Verdict: Should You Lease or Construct an Office or Home?

Before the verdict to lease or construct an office or home is reached there are various mitigating aspects that should be considered first. They include doing market research to see the location to build the facility and creating customer surveys based on more defined community interest. Any other knowledge source that can be utilized to make the best decision on building the medical office and taking time to focus on the other nonprofits within the city and the state to analyze their strategic positions. Many people prefer leasing shops or offices because of reason such as no mortgage, deductible payment, flexibility, and few responsibility. However, property owners also have their reasons why they lease their property. These reasons include no loss of property and equity, financing and payment flexibility, resale value and tax benefits such as depreciation and investment tax credits. Leases standards or rule and regulation are changing since some new rules are being implemented. The person who leases a new building currently has different rules and regulations from the people who leased their property a decade ago. This paper will depict any change in the allocation for the shop and office that I was leasing . Also, the paper will depict my type and treatment of the new lease. 

Leasing rules according to FASB 

Below is updated standards According to Accounting Standards Update (ASU) 

The organization is supposed to apply the transition provision of new standards at the date it is being adopted instead of an earliest comparative period depicted in the financial statement of a company. 

the Include a practical expedient which would allow lessors not to separate associated lease component from non-lease components if a particular condition is attained. 

Since I have a new lease, I made changes to the allocation of the shop and office because the terms of the agreement have changed from the previous agreement. The new lease had a new financial agreement because the value of the property which I lease has appreciated; this affects the fees paid for leasing shop and office. The change in leasing rates affected my allocation for the office and shop. I was forced to change the size of my office by reducing the rental space in my office. However, I maintained my shop space although the leasing rates were increased. Since I have a new lease, I will ensure that my business adheres to the updated lease standards that require that businesses to apply the transition provision of new standards transition provision of new standards. 

For the new contract, the new lease is treated as a triple net lease. This type of lease is typically a total of three expense categories; maintenance, insurance, real property taxes. This type of expenses is usually referred to as pass-through expenses or operating expenses since the property owner or the landlord passes the expenses to the tenant in the form of more rent over and above the standard rental rates. These extra charges that are imposed on tenants or lessors are also known as TICAM (taxes, insurance, and common area maintenance). Frequently recognized as an “NNN Lease,” a triple total lease can occur in a multi-tenant or single-tenant building. If it is a “single-tenant” lease, the property occupant or tenant takes charge of the exterior upkeep and landscaping hence controlling the appearance of the property. If the lease is multi-tenant, the landlord takes charge of exterior upkeep, so that no tenant can inconvenience other people who occupy the premises. Also, in the multi-tenant lease, the occupants reimburse their pro-rata share of operating expenditure. Under this lease, tenants have rights to audit the operating expense of the landlord. In our case, the new lease will be treated as a triple net lease but sub-categorized under the multi-tenant lease. The landlord would maintain the property through the extra-fee other tenants and I would be paying. 

My journal entry of my leasing from September to October 

September 

October