Title: What are Leasehold Improvements? - Definition | Meaning | Example
Headings: What are Leasehold Improvements?
What are Leasehold Improvements?
What Does Leasehold Improvements Mean?
Example
Summary Definition

Content: although, they may be required by the tenant at any time during the lease term. Depending on the marketability of a rental property, a lessor may provide improvement incentives to make the property more attractive to prospective tenants. If the lessor does not provide financial support for the improvements, the burden of cost falls on the tenant who will account for the costs appropriately. How are leasehold improvements accounted for? In accordance with generally accepted accounting principles ( GAAP ), as well as the IRS tax code, the accounting for improvements is similar to accounting for fixed assets. The purchase cost of the improvement is depreciated over the useful life of the corresponding assets. While GAAP requires that the depreciable life is spread over the estimated useful life of the improvements, the IRS requires depreciation to occur over the life of the original property (building), or 15 years. While the owner of the property will maintain the improvements as part of the building, the capitalization of the improvements allows the tenant to spread the burden of the expense over the life of the asset. Let’s look at an example. Example
Let’s say you’re a distributor of kitchen appliances, and you just signed a lease for additional warehouse space in another city.