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Other topics
8.1 Chapter overview
This chapter discusses the following topics:
□ Subleases
□ Sales of leased assets
□ Sales of lease receivables and unguaranteed residual assets
□ Sales of equipment with guaranteed minimum resale amount
□ Business combinations
Lessors may execute lease transactions using limited partnerships, joint ventures, and trusts. Special-
purpose lessor entities are also frequently used to structure leases, including synthetic leases. These
lessor entities, as well as similar entities employed by a lessee, should be evaluated to determine
whether they should be consolidated by the lessor or lessee. See PwC’s Consolidation and equity
method of accounting guide for more information.
8.2 Subleases
In a sublease, an entity is both a lessee and a lessor for the same underlying asset. In a sublease a
lessee subleases the underlying asset to a sublessee; the entity is then referred to as the intermediate
lessor (or sublessor). In a sublease transaction, the lease between the original lessee and lessor
(referred to as the head lease) remains in effect. Figure 8-1 illustrates a typical sublease arrangement.
Figure 8-1
Typical sublease arrangement
Subleases can arise for many reasons–for example, when a lessee no longer requires leased space and
subleases the excess to another party. Another example is when an intermediate lessor leases
hardware to its customer (sublessee) bundled with additional goods and services.
See LG 9.2.4, LG 9.2.5, and LG 9.3.2.3 for information on the disclosure requirements for subleases.
8-2
