Hello Stephen,
I would appreciate your assistance with the below pls.
In the context of subleases, there are two exceptions mentioned in the BPP textbook, and I'm not entirely sure how they work.
Example
Company A is the head lessor and leases an asset to company B for 9 months. company B then subleases the asset to company C.
Assume company B has elected to apply the short-term lease exemption.
I understand that the sublease between B and C must always be classified as an operating lease (as the exception is very clear)
My question is about the original lease between A and B.
Does Company B still recognise an ROU asset and lease liability in its SFP for the original lease with A?
Or does Company B recognise only the lease payments as expenses in SPL because it has applied the short-term lease exemption?
Thank you for your help.