# Lease Accounting Memo: [Arrangement name]

> Technical accounting memo for one lease or one lease portfolio, from
> the lessee's side: arrangement summary, whether the contract contains
> a lease, components, lease term, payments and discount rate,
> classification, initial and subsequent measurement, remeasurement,
> exemptions, sale and leaseback, journal entries and disclosure.
> Structure aligned with IFRS 16 Leases (effective for annual periods
> beginning on or after 2019-01-01) and FASB ASC Topic 842, cited by
> standard and paragraph number only. Obtain the standard for the
> normative text. Replace every `[bracketed]` value and every row
> marked *Example*. This is a document format, not accounting, audit,
> tax, legal or financial advice.

<!--
Guidance: How to use this template
- Purpose: record the judgements and calculations behind a lease, so
  the numbers in the fixed asset and lease sub-ledger can be traced to
  a signed contract, an approved discount rate and an approved lease
  term.
- Write one memo per significant lease (property, fleet, data centre
  capacity, major equipment) and one portfolio memo for homogeneous
  small leases. Re-open it for every modification, option reassessment
  or index change.
- Cite paragraph numbers, never copy or paraphrase standard text.
- The worked example uses the fictional Corvid Commerce Group (IFRS
  reporter, functional currency EUR, calendar year) leasing a
  fulfilment warehouse in Germany. Every number is recomputed.
- Related templates: Technical Accounting Memo
  (`finance/technical-accounting-memo`) for the generic format, Fixed
  Asset Register (`finance/fixed-asset-register`) for right-of-use
  assets and leasehold improvements, Impairment Test Memo
  (`finance/impairment-test-memo`) when right-of-use assets sit in a
  cash-generating unit, Journal Entry Support
  (`finance/journal-entry-support`) and Covenant Compliance Certificate
  (`finance/covenant-compliance-certificate`) when lease liabilities
  enter debt covenants.
-->

## Document control

<!-- Guidance: Identify the lease contract and the framework. Record the incremental borrowing rate approval reference here, since the rate drives every number. -->

| Field | Value |
|---|---|
| Document ID | [LAM-YYYY-NNN] *Example:* LAM-2027-002 |
| Arrangement | [Asset, lessor, contract ID] *Example:* Fulfilment warehouse, Leipzig; fictional lessor Brightmoor Logistics Properties; lease LSE-DE-2026-14 |
| Lessee entity | [Legal entity] *Example:* Corvid Commerce GmbH (CC-DE, Germany), consolidated into Corvid Commerce Group plc |
| Framework | [IFRS 16 / ASC 842 / both] *Example:* IFRS 16 (group); ASC 842 comparison in section 12 |
| Commencement date | YYYY-MM-DD *Example:* 2027-01-01 |
| Discount rate approval | [Treasury memo reference] *Example:* TRS-IBR-2026-Q4, 5.0% |
| Currency and units | [EUR, whole euros unless stated] |
| Version | [0.1] |
| Status | [Draft / In review / Final] |
| Owner | [@lease-accounting-lead] |
| Approvers/reviewers | [@group-controller], [@treasury], [@real-estate] |
| Last updated | YYYY-MM-DD |
| Classification | [Confidential] |

### Approvals

| Role | Name | Decision | Date |
|---|---|---|---|
| Preparer, technical accounting | [@name] | [Prepared] | YYYY-MM-DD |
| Group treasury (discount rate) | [@name] | [Confirmed] | YYYY-MM-DD |
| Group controller | [@name] | [Approve / Return] | YYYY-MM-DD |

### Revision history

| Version | Date | Author | Change summary |
|---|---|---|---|
| 0.1 | YYYY-MM-DD | [@name] | Draft from signed lease |
| 1.0 | YYYY-MM-DD | [@name] | *Example:* Approved at commencement |
| 1.1 | YYYY-MM-DD | [@name] | *Example:* Index remeasurement from 2029-01-01 (section 9) |

## Contents

<!-- Guidance: Keep this list aligned with the headings. -->

1. [Summary and conclusion](#1-summary-and-conclusion)
2. [Arrangement facts and documents reviewed](#2-arrangement-facts-and-documents-reviewed)
3. [Does the contract contain a lease](#3-does-the-contract-contain-a-lease)
4. [Lease and non-lease components](#4-lease-and-non-lease-components)
5. [Lease term](#5-lease-term)
6. [Lease payments and discount rate](#6-lease-payments-and-discount-rate)
7. [Initial measurement](#7-initial-measurement)
8. [Subsequent measurement](#8-subsequent-measurement)
9. [Reassessment, remeasurement and modifications](#9-reassessment-remeasurement-and-modifications)
10. [Exemptions and practical expedients](#10-exemptions-and-practical-expedients)
11. [Sale and leaseback and subleases](#11-sale-and-leaseback-and-subleases)
12. [US GAAP classification and comparison](#12-us-gaap-classification-and-comparison)
13. [Journal entries, presentation and disclosure](#13-journal-entries-presentation-and-disclosure)
14. [Controls and monitoring](#14-controls-and-monitoring)
15. [Glossary and references](#15-glossary-and-references)
16. [Standard and licence note](#standard-and-licence-note)

## 1. Summary and conclusion

<!-- Guidance: Write this last. State whether there is a lease, the term, the rate, the opening liability and right-of-use asset, and the first-year profit or loss effect. Name the key judgement. -->

Lead with the numbers a reviewer needs and the judgement that could
change them. If the lease term or the discount rate were close calls,
show the effect of the alternative so the approver can see what is at
stake.

*Example:* The Leipzig warehouse contract contains a lease of an
identified building. The lease term is the 8-year non-cancellable
period from 2027-01-01; the 4-year extension option is not reasonably
certain to be exercised. Annual rent of EUR 480,000 is payable on
1 January each year and is indexed to the German consumer price index
every two years. Using an incremental borrowing rate of 5.0%, the
opening lease liability is EUR 2,777,459 (seven remaining payments) and
the right-of-use asset is EUR 3,351,871 after the first payment,
initial direct costs, the restoration estimate and the landlord
incentive. FY2027 profit or loss under IFRS 16 shows depreciation of
EUR 418,984 and lease interest of EUR 138,873. The service charge of
EUR 40,000 per year is a non-lease component and is expensed. Extending
the term to 12 years would raise the opening liability by about
EUR 1.2 million (section 5).

| Item | Conclusion | Section |
|---|---|---|
| Lease exists | Yes, identified building, Corvid directs use | 3 |
| Components | Lease of building; facility services separated | 4 |
| Lease term | 8 years (option not reasonably certain) | 5 |
| Discount rate | IBR 5.0% | 6 |
| Opening lease liability | EUR 2,777,459 | 7 |
| Opening right-of-use asset | EUR 3,351,871 | 7 |
| US GAAP classification | Operating lease | 12 |

## 2. Arrangement facts and documents reviewed

<!-- Guidance: Capture every term that affects the accounting: dates, payments, options, indexation, incentives, restoration and service charges. Pitfall: missing side letters on rent-free months or fit-out contributions. -->

Read the signed lease and every amendment, side letter and handover
protocol. Ask the real estate team whether the lessor made any
commitments outside the lease, such as rent-free periods, fit-out
contributions or rights to substitute space. Record when the lessor
made the asset available for use, because commencement is that date,
not the date of signature or the date of the first payment.

### 2.1 Documents reviewed

| Ref | Document | Date | Source |
|---|---|---|---|
| DOC-001 *(Example)* | Lease agreement LSE-DE-2026-14 | 2026-09-30 | Real estate contract system |
| DOC-002 *(Example)* | Handover protocol, keys and access | 2027-01-01 | Facilities |
| DOC-003 *(Example)* | Landlord fit-out contribution letter | 2026-10-15 | Real estate |
| DOC-004 *(Example)* | Agent invoice, letting fee | 2026-10-20 | Accounts payable |
| DOC-005 *(Example)* | Treasury IBR memo TRS-IBR-2026-Q4 | 2026-12-10 | Treasury |
| DOC-006 *(Example)* | Network strategy paper, fulfilment sites 2027 to 2031 | 2026-11-30 | Operations |

### 2.2 Key terms

| Term | Contract position *(Example)* |
|---|---|
| Asset | Whole warehouse building, 18,000 square metres, with yard; no substitution right |
| Commencement | 2027-01-01 (handover) |
| Non-cancellable period | 8 years, to 2034-12-31 |
| Extension option | One option of 4 years at market rent, notice 18 months before expiry |
| Termination option | None |
| Rent | EUR 480,000 per year, payable annually in advance on 1 January |
| Indexation | Rent adjusted every two years by the change in German CPI, first adjustment 2029-01-01 |
| Service charge | EUR 40,000 per year for facility management, security and maintenance |
| Property tax and insurance | Recharged at cost, variable, not part of lease payments |
| Landlord incentive | EUR 60,000 fit-out contribution received at commencement |
| Initial direct costs | Letting agent fee EUR 36,000, incurred only because the lease was signed |
| Restoration | Remove racking and restore floor at the end of the lease; estimated cost EUR 150,000 in 2034 prices |

## 3. Does the contract contain a lease

<!-- Guidance: Test identified asset and right to control the use, with evidence. Pitfall: missing embedded leases in service contracts (dedicated servers, logistics with dedicated vehicles, capacity contracts). -->

Assess whether there is an identified asset and whether the customer
has the right to obtain substantially all the economic benefits from
its use and to direct its use throughout the period of use (IFRS 16
paragraphs 9 to 11 and B9 to B31; ASC 842-10-15-3 to 15-16). Record the
evidence for each element. Substitution rights matter only when the
supplier has both the practical ability and an economic benefit to
substitute; a contractual right that will never be used does not
defeat an identified asset.

Use the same analysis for service contracts that may contain embedded
leases. Logistics, colocation, cloud capacity and outsourced
manufacturing contracts are common sources. Keep a register of
contracts assessed and the result, because auditors test completeness
of the lease population.

| Element | Evidence | Result |
|---|---|---|
| Identified asset *(Example)* | Building specified by address and land register entry | Met |
| Substantive substitution right *(Example)* | None in the contract | No substitution right |
| Substantially all economic benefits *(Example)* | Exclusive use of the whole building and yard for 8 years | Met |
| Right to direct how and for what purpose *(Example)* | Corvid decides what is stored, operating hours and layout; lessor rights are protective only | Met |
| Conclusion *(Example)* | | Contract contains a lease |

```mermaid
flowchart TD
  A[Contract] --> B{Identified asset?}
  B -- No --> X[No lease: service contract]
  B -- Yes --> C{Customer obtains substantially<br/>all economic benefits?}
  C -- No --> X
  C -- Yes --> D{Customer directs how and<br/>for what purpose the asset is used?}
  D -- No --> X
  D -- Yes --> L[Lease: apply IFRS 16 or ASC 842]
```

## 4. Lease and non-lease components

<!-- Guidance: Separate the right to use the asset from services the lessor provides, unless the practical expedient is elected for that class of asset. Pitfall: capitalising service charges as lease payments without electing the expedient, which overstates the liability. -->

Identify each separate lease component and each non-lease component
(IFRS 16 paragraphs 12 to 17; ASC 842-10-15-28 to 15-42). Allocate the
consideration on relative stand-alone prices, or apply the lessee
practical expedient to account for each lease component and its
associated non-lease components as a single lease component for a
class of underlying asset (IFRS 16 paragraph 15; ASC 842-10-15-37).
Record the election by asset class in the accounting policy and apply
it consistently.

Payments that do not transfer a good or service to the lessee, such as
property tax and insurance of the lessor, are not components; they are
part of the consideration when fixed and are variable payments when
they depend on actual cost.

| Component | Annual amount (EUR) | Treatment *(Example)* |
|---|---|---|
| Right to use the building *(Example)* | 480,000 | Lease component, capitalised |
| Facility management, security, maintenance *(Example)* | 40,000 | Non-lease component; Corvid does not elect the expedient for property, so expensed as incurred |
| Property tax and insurance recharge *(Example)* | Variable | Variable payments not based on an index or rate; expensed when incurred |

*Example check:* the contract states rent and service charge
separately, and Corvid's procurement team confirmed that the service
charge is in line with the price of comparable stand-alone facility
management contracts in the region. No reallocation is therefore
needed.

## 5. Lease term

<!-- Guidance: The non-cancellable period plus option periods the lessee is reasonably certain to exercise (extension) or not exercise (termination). Document the economic incentives. Pitfall: ignoring significant leasehold improvements, relocation costs or the asset's importance to operations. -->

Start from the non-cancellable period, then assess each option against
the economic factors in IFRS 16 paragraphs B37 to B40 (ASC 842-10-55-26):
contractual terms for the option period compared with market rates,
significant leasehold improvements, costs of terminating or relocating,
the importance of the asset to operations and past practice. Assess at
commencement and reassess only on a significant event or change in
circumstances within the lessee's control (IFRS 16 paragraph 20; ASC
842-10-35-1).

| Factor | Evidence *(Example)* | Points towards extension? |
|---|---|---|
| Rent in the option period | Market rent at the time, no discount | No |
| Leasehold improvements | Fixed fit-out EUR 250,000 depreciated over 8 years; automation and racking (EUR 650,000) are relocatable | Weak |
| Relocation cost | About EUR 300,000, below one year's rent plus service charge | Weak |
| Importance of the site | One of four German sites; network strategy reviews every site in 2031 | No |
| Past practice | Two previous warehouse leases not extended | No |
| Conclusion | Extension not reasonably certain; lease term 8 years | |

*Example sensitivity:* if the 4-year option were included, four more
annual payments of EUR 480,000 due at the start of years 9 to 12 would
add their present value at 5.0%, EUR 1,209,620 (rounded), to the
opening lease liability. Show this figure to the approver because the
judgement is significant and the auditor will ask for it.

## 6. Lease payments and discount rate

<!-- Guidance: List the payments included in the liability and justify the discount rate. Pitfall: using a group rate without adjusting for term, currency and security, or including variable payments that are not based on an index. -->

Include in the liability the payments listed in IFRS 16 paragraph 27
(ASC 842-10-30-5): fixed payments less incentives receivable, variable
payments based on an index or rate measured at the commencement-date
index, amounts expected under residual value guarantees, and option or
penalty payments when reasonably certain. Exclude variable payments
linked to usage or performance.

Use the interest rate implicit in the lease when it can be readily
determined; otherwise use the lessee's incremental borrowing rate (IFRS
16 paragraph 26; ASC 842-20-30-3, which also allows non-public business
entities a risk-free rate election by asset class). Document the build
of the incremental rate: a reference rate for the currency and term,
the lessee's credit spread, and adjustments for security and the
nature of the asset. Both IFRS 16 and ASC 842 define the rate on a
borrowing with similar security (collateralised under ASC 842), so the
security adjustment normally reduces the spread compared with senior
unsecured debt. Any positive adjustment needs its own reason, such as
an asset-specific or size premium, and must be shown separately.

| IBR building block | Value *(Example)* | Source |
|---|---|---|
| EUR reference rate, 8-year amortising profile | 2.6% | Treasury market data, 2026-12-10 |
| Corvid credit spread for 8-year senior unsecured debt | 2.0% | Recent bank facility margin and secondary bond spreads of peers |
| Adjustment for security (collateral of the right-of-use asset) | -0.2% | Lower spread on secured property lending than on senior unsecured debt |
| Asset-specific premium (single asset, loan size and limited liquidity of the collateral) | +0.6% | Treasury judgement from secured real estate lending margins for single-asset loans |
| Incremental borrowing rate | 5.0% | 2.6% + 2.0% - 0.2% + 0.6%; TRS-IBR-2026-Q4 |

The present value of a payment stream in advance is:

$$
PV = \sum_{t=0}^{n-1} \frac{P}{(1+r)^{t}}
$$

With P = EUR 480,000, r = 5.0% and n = 8, the present value of all
eight payments is EUR 3,257,459. The first payment is made at
commencement, so it enters the right-of-use asset directly and the
lease liability is the present value of the remaining seven payments,
EUR 2,777,459.

## 7. Initial measurement

<!-- Guidance: Show the opening lease liability and right-of-use asset with each building block. Pitfall: forgetting restoration costs or deducting incentives already received twice. -->

Measure the lease liability at the present value of unpaid lease
payments (IFRS 16 paragraph 26; ASC 842-20-30-1). Measure the
right-of-use asset at the liability plus payments made at or before
commencement, less incentives received, plus initial direct costs and
an estimate of dismantling and restoration costs (IFRS 16 paragraphs
23 and 24; ASC 842-20-30-5, with restoration handled under ASC 410 in
US GAAP). Recognise the restoration obligation as a provision under
IAS 37 at its present value using the provision discount rate, which is
different from the lease rate.

| Building block | Amount (EUR) | Calculation *(Example)* |
|---|---|---|
| Lease liability | 2,777,459 | PV of 7 payments of 480,000 at 5.0%, first due one year after commencement |
| Payment at commencement | 480,000 | First annual rent on 2027-01-01 |
| Initial direct costs | 36,000 | Letting agent fee |
| Restoration provision | 118,411 | EUR 150,000 / 1.03^8, provision rate 3.0% (IAS 37) |
| Less incentive received | (60,000) | Landlord fit-out contribution |
| Right-of-use asset | 3,351,871 | Sum of the lines above, incentive deducted |

*Example check:* 2,777,459 + 480,000 + 36,000 + 118,411 - 60,000 =
3,351,870, shown as EUR 3,351,871 because each line is rounded from an
unrounded calculation. Use the unrounded figure in the sub-ledger.

## 8. Subsequent measurement

<!-- Guidance: Show the liability schedule and the right-of-use depreciation. State the depreciation period and why. Pitfall: depreciating the asset over its useful life when ownership does not transfer. -->

Measure the liability at amortised cost using the effective interest
method (IFRS 16 paragraph 36; ASC 842-20-35-1 and 35-4 for finance
leases). Depreciate the right-of-use asset from commencement to the
earlier of the end of its useful life and the end of the lease term,
unless ownership transfers or a purchase option is reasonably certain
(IFRS 16 paragraphs 31 and 32). Test it for impairment under IAS 36
(IFRS 16 paragraph 33). Unwind the restoration provision as a finance
cost.

The liability at each year end, before the payment due the next day,
is:

$$
L_{\text{end}} = L_{\text{start}} \times (1 + r)
$$

### 8.1 Lease liability schedule (base case, before indexation)

| Year | Liability after 1 January payment | Interest at 5.0% | Liability at 31 December | Payment on next 1 January |
|---|---|---|---|---|
| 2027 *(Example)* | 2,777,459 | 138,873 | 2,916,332 | 480,000 |
| 2028 *(Example)* | 2,436,332 | 121,817 | 2,558,149 | 480,000 |
| 2029 *(Example)* | 2,078,149 | 103,907 | 2,182,056 | 480,000 |
| 2030 *(Example)* | 1,702,056 | 85,103 | 1,787,159 | 480,000 |
| 2031 *(Example)* | 1,307,159 | 65,358 | 1,372,517 | 480,000 |
| 2032 *(Example)* | 892,517 | 44,626 | 937,143 | 480,000 |
| 2033 *(Example)* | 457,143 | 22,857 | 480,000 | 480,000 |
| 2034 *(Example)* | 0 | 0 | 0 | 0 |
| Total interest | | 582,541 | | |

*Example check:* total payments of EUR 3,840,000 (8 x 480,000) equal the
present value of EUR 3,257,459 plus total interest of EUR 582,541. The
last payment, on 2034-01-01, settles the liability, and the lease ends
on 2034-12-31.

### 8.2 Right-of-use asset and profit or loss

| Year | Depreciation (EUR) | Lease interest (EUR) | Provision unwinding at 3.0% (EUR) | Total lease-related expense, IFRS 16 and IAS 37 (EUR) |
|---|---|---|---|---|
| 2027 *(Example)* | 418,984 | 138,873 | 3,552 | 561,409 |
| 2028 *(Example)* | 418,984 | 121,817 | 3,659 | 544,460 |

Depreciation is EUR 3,351,871 / 8 = EUR 418,984 per year (final year
adjusted by EUR 1 for rounding). The total expense is front-loaded
because interest falls as the liability is repaid. Under IFRS 18, which
applies from 2027-01-01, depreciation sits in the operating category
and lease interest in the financing category; check the group mapping
in IFRS 18 Transition Plan (`finance/ifrs-18-transition-plan`).

## 9. Reassessment, remeasurement and modifications

<!-- Guidance: List the events that change the numbers and how each is treated. Show any remeasurement already made. Pitfall: using a revised discount rate for an index change, or no revised rate for a change in lease term. -->

Remeasure the liability when the lease term changes, when the
assessment of a purchase option changes, when expected residual value
guarantee payments change, or when future payments change because of
an index or rate (IFRS 16 paragraphs 39 to 43). Under ASC 842 the
remeasurement triggers are narrower (ASC 842-10-35-4 and 35-5): a
change in an index or rate alone does not lead to remeasurement, and
the higher payments are variable lease cost when incurred unless the
liability is remeasured for another reason (section 12). Under IFRS 16, use a revised discount rate for term and purchase-option
changes, and the unchanged rate for index changes, except where a
floating interest rate drives the change. Adjust the right-of-use
asset for the remeasurement, and take any amount below zero to profit
or loss.

Account for a modification as a separate lease only when it adds a
right to use another asset at a price commensurate with its stand-alone
price (IFRS 16 paragraphs 44 to 46; ASC 842-10-25-8 to 25-18). Other
modifications are remeasured at the effective date with a revised rate.

| Event | Treatment | Rate |
|---|---|---|
| RMS-001 *(Example)* CPI indexation 2029-01-01, +6.0% | IFRS 16: remeasure liability, adjust right-of-use asset (ASC 842: no remeasurement, see section 12) | Unchanged 5.0% |
| RMS-002 *(Example)* Decision in 2031 to exercise the extension | Reassess term, remeasure | Revised IBR at that date |
| MOD-001 *(Example)* Additional adjacent hall at market rent | Separate lease | Own IBR |
| MOD-002 *(Example)* Rent reduction without change in scope | Modification, remeasure | Revised IBR |

*Example remeasurement RMS-001:* from 2029-01-01 the annual payment
rises from EUR 480,000 to EUR 508,800 (480,000 x 1.06) for the six
remaining payments due 2029 to 2034. On 2029-01-01, immediately before
that payment, the liability on the old payments is EUR 2,558,149. The
present value of six payments of EUR 508,800 in advance at the
unchanged 5.0% is EUR 2,711,638. The increase of EUR 153,489 is debited
to the right-of-use asset. The asset carrying amount at that date was
EUR 2,513,903 (3,351,871 less two years of depreciation of 418,984), so
the adjusted amount of EUR 2,667,392 is depreciated over the remaining
six years at EUR 444,565 per year.

## 10. Exemptions and practical expedients

<!-- Guidance: Record each election and the asset classes to which it applies. Pitfall: applying the low-value exemption under US GAAP, which has no such exemption. -->

Record the elections the group has made in its accounting policy and
confirm they apply to this arrangement. Elections apply by class of
underlying asset (short-term leases) or lease by lease (low-value
assets under IFRS 16). Keep the list of leases expensed under the
exemptions, with their annual cost, because the disclosure needs the
expense amount.

| Election | IFRS 16 reference | ASC 842 reference | Group policy *(Example)* | Applies here? |
|---|---|---|---|---|
| Short-term leases (12 months or less, no purchase option) | Paragraphs 5 to 8 | 842-20-25-2 | Elected for vehicles and equipment | No |
| Low-value assets | Paragraphs 5, 6 and B3 to B8 | No equivalent | Elected for laptops, phones and small office equipment under the group threshold of [EUR amount] | No |
| Combine lease and non-lease components | Paragraph 15 | 842-10-15-37 | Elected for vehicles; not elected for property | No (property) |
| Portfolio approach | Paragraph B1 | Permitted under the Topic 842 implementation guidance; check the paragraph | Used for vehicle fleet | No |
| Risk-free rate for non-public entities | Not available | 842-20-30-3 | Not applicable (the group is a public business entity for US GAAP purposes, as an SEC filer) | No |

## 11. Sale and leaseback and subleases

<!-- Guidance: Complete this section only when the lessee sold the asset to the lessor or subleases part of it. Otherwise state "Not applicable" with the reason. -->

For a sale and leaseback, first decide whether the transfer is a sale
under IFRS 15 (IFRS 16 paragraphs 98 to 103; ASC 842-40-25-1 to 25-3).
If it is a sale, measure the right-of-use asset at the retained
proportion of the previous carrying amount and recognise only the gain
relating to the rights transferred. The amendment Lease Liability in a
Sale and Leaseback (issued 2022, effective for periods beginning on or
after 2024-01-01) governs subsequent measurement when payments are
variable. If it is not a sale, account for the proceeds as a financial
liability.

For a sublease, the intermediate lessor classifies the sublease by
reference to the right-of-use asset of the head lease under IFRS 16
paragraph B58, and by reference to the underlying asset under ASC
842-10-25-6.

*Example:* Not applicable. Corvid did not own the warehouse and does
not sublet any part of it.

## 12. US GAAP classification and comparison

<!-- Guidance: Needed for a US GAAP reporting package or a US-listed parent. Classify the lease under ASC 842 and show how the profit or loss pattern differs from IFRS 16. -->

Under ASC 842 a lessee classifies each lease as finance or operating
using the criteria in ASC 842-10-25-2: transfer of ownership, a purchase
option reasonably certain to be exercised, a term for the major part of
the remaining economic life, a present value of payments amounting to
substantially all of the fair value, and a specialised asset. ASC
842-10-55-2 permits a common approach that reads "major part" as 75%
or more and "substantially all" as 90% or more; record the thresholds
in the group policy if used.

| Criterion | Evidence *(Example)* | Met? |
|---|---|---|
| Ownership transfer | None | No |
| Purchase option | None | No |
| Term vs remaining economic life | 8 years of about 40 years (20%) | No |
| PV of payments vs fair value | EUR 3,257,459 vs about EUR 9,500,000 (34%) | No |
| Specialised asset | General-purpose warehouse | No |
| Classification | | Operating lease |

For an operating lease, ASC 842 presents a single straight-line lease
cost (ASC 842-20-25-6). The liability is measured the same way as under
IFRS 16, but the right-of-use asset excludes the restoration cost,
which is an asset retirement cost under ASC 410.

| Item | IFRS 16 | ASC 842 operating |
|---|---|---|
| Opening liability *(Example)* | 2,777,459 | 2,777,459 |
| Opening right-of-use asset *(Example)* | 3,351,871 | 3,233,459 (excludes restoration) |
| Annual lease cost *(Example)* | Depreciation 418,984 plus interest (138,873 in 2027) | Straight-line 477,000 |
| Profit or loss pattern | Front-loaded | Even |
| Index or rate changes, RMS-001 *(Example)* | Remeasure when the cash flows change (IFRS 16 paragraph 42(b)): liability and asset +153,489 on 2029-01-01 | No remeasurement unless the liability is remeasured for another event: no entry on 2029-01-01; variable lease cost of 28,800 a year (508,800 - 480,000) from 2029 on top of the 477,000 straight-line cost |
| Cash flow statement | Principal and interest in financing (IAS 7 as amended by IFRS 18 from 2027); short-term, low-value and variable payments in operating | Operating |

*Example check:* the straight-line cost is total payments of
EUR 3,840,000 plus initial direct costs of EUR 36,000 less the incentive
of EUR 60,000, divided by 8 years: EUR 3,816,000 / 8 = EUR 477,000. The
ASC 842 asset is 2,777,459 + 480,000 + 36,000 - 60,000 = EUR 3,233,459.

## 13. Journal entries, presentation and disclosure

<!-- Guidance: Show commencement and first-year entries, then map the lease to the disclosures. Pitfall: presenting the whole liability as non-current. -->

Record the commencement entries in the lease sub-ledger and post
summary entries to the general ledger each month. Split the liability
between current and non-current at each reporting date: the current
portion is the principal falling due within twelve months. Map the
lease to the disclosure requirements in IFRS 16 paragraphs 47 to 60 and
ASC 842-20-45 and 842-20-50, including the maturity analysis of lease
liabilities required under IFRS 7.

| JE | Date | Debit | Credit | Amount (EUR) | Description |
|---|---|---|---|---|---|
| JE-01 *(Example)* | 2027-01-01 | Right-of-use asset | Lease liability | 2,777,459 | Initial recognition |
| JE-02 *(Example)* | 2027-01-01 | Right-of-use asset | Cash | 480,000 | First rent paid at commencement |
| JE-03 *(Example)* | 2027-01-01 | Right-of-use asset | Prepaid / accrued agent fee | 36,000 | Initial direct costs |
| JE-04 *(Example)* | 2027-01-01 | Right-of-use asset | Restoration provision | 118,411 | Restoration estimate |
| JE-05 *(Example)* | 2027-01-01 | Cash | Right-of-use asset | 60,000 | Landlord incentive received |
| JE-06 *(Example)* | Monthly 2027 | Depreciation expense | Accumulated depreciation, right-of-use | 34,915 | 418,984 / 12, rounded |
| JE-07 *(Example)* | Monthly 2027 | Interest expense | Lease liability | 11,573 | 138,873 / 12, rounded |
| JE-08 *(Example)* | 2027-12-31 | Finance cost | Restoration provision | 3,552 | Provision unwinding |

| Disclosure at 2027-12-31 | Amount (EUR) *(Example)* |
|---|---|
| Right-of-use assets, buildings, net | 2,932,887 (3,351,871 - 418,984) |
| Lease liability, current | 480,000 (payment due 2028-01-01) |
| Lease liability, non-current | 2,436,332 |
| Depreciation of right-of-use assets | 418,984 |
| Interest on lease liabilities | 138,873 |
| Expense on non-lease service component | 40,000 |
| Total cash outflow for leases | 480,000 |
| Undiscounted maturity: within 1 year / 1 to 5 years / over 5 years | 480,000 / 1,920,000 / 960,000 |

*Example check:* the undiscounted payments remaining at 2027-12-31 are
the seven payments due 2028 to 2034, EUR 3,360,000, split as one within
a year, four in years two to five and two after five years.

## 14. Controls and monitoring

<!-- Guidance: Describe the controls that keep the lease population complete and the inputs current. Pitfall: index changes and option decisions that are never fed back to the sub-ledger. -->

Lease accounting fails most often through incomplete populations and
stale inputs rather than wrong formulas. Assign owners for contract
intake, the discount rate table, option reassessments and index
updates, and record the evidence each control produces. Reconcile the
lease sub-ledger to the general ledger monthly and to the fixed asset
register quarterly. Link these controls to the Risk and Control Matrix
(`compliance/risk-control-matrix`).

| Control ID | Control | Frequency | Owner | Evidence |
|---|---|---|---|---|
| LSE-C-001 *(Example)* | Procurement and real estate route every new contract with an asset to lease review | Per contract | [@procurement] | Intake ticket |
| LSE-C-002 *(Example)* | IBR table approved by treasury | Quarterly | [@treasury] | Signed rate memo |
| LSE-C-003 *(Example)* | Index changes and option notice dates tracked and posted | Monthly | [@lease-accountant] | Calendar and sub-ledger log |
| LSE-C-004 *(Example)* | Sub-ledger reconciled to general ledger | Monthly | [@lease-accountant] | Account reconciliation (`finance/account-reconciliation`) |
| LSE-C-005 *(Example)* | Embedded lease review of new service contracts above [EUR threshold] | Per contract | [@technical-accounting] | Assessment register |

## 15. Glossary and references

<!-- Guidance: Define terms in your own words as used in this memo. -->

### 15.1 Glossary

| Term | Meaning in this memo |
|---|---|
| Right-of-use (ROU) asset | The lessee's asset representing its right to use the leased item for the lease term |
| Lease liability | Present value of lease payments not yet paid |
| Incremental borrowing rate (IBR) | Rate the lessee would pay to borrow over a similar term, with similar security, the funds needed for an asset of similar value |
| Lease term | Non-cancellable period plus option periods the lessee is reasonably certain to use |
| Initial direct costs | Costs that would not have been incurred had the lease not been obtained |
| Non-lease component | A service supplied with the lease that transfers a separate benefit to the lessee |
| Remeasurement | Recalculation of the liability after a change in payments, term or options, with an offset to the ROU asset |
| Operating lease (ASC 842) | A lessee lease that meets none of the finance lease criteria; single straight-line cost |

### 15.2 References

| Reference | Version or date | Use |
|---|---|---|
| IFRS 16 Leases (IFRS Foundation) | Effective for periods from 2019-01-01, as amended (including Lease Liability in a Sale and Leaseback, effective 2024-01-01); cited by paragraph number only | Lessee model |
| FASB ASC Topic 842 Leases | As amended; cited by paragraph number only | US GAAP comparison |
| IAS 37 and FASB ASC Topic 410 | Current | Restoration obligation |
| IAS 36 Impairment of Assets | Current | ROU impairment |
| IFRS 18 Presentation and Disclosure in Financial Statements | Effective 2027-01-01 | Presentation categories |
| Technical Accounting Memo (`finance/technical-accounting-memo`) | This collection | Generic memo format |
| [Group lease accounting policy] | [Version] | Elections and thresholds |

## Standard and licence note

Structure aligned with the lessee model of IFRS 16 Leases and FASB ASC
Topic 842 Leases. Standards are cited by name and paragraph number only;
no text, definitions or illustrative examples from the IFRS Foundation
or FASB are reproduced or paraphrased, and IFRS is a trademark of the
IFRS Foundation used nominatively. Obtain the current standards for the
normative requirements and check later amendments and effective dates.
Corvid Commerce Group, Brightmoor Logistics Properties and every figure
are fictional and original. This template is original text written for
this collection and is not accounting advice. Template licence: MIT.