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: 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. The property is in need of some upgrades, but it’s a perfect location. After negotiating lease terms and finalizing a deal, the owner of the warehouse has agreed to provide you with $10,000 toward building improvements. Upon entering the building, you and your team determine you need to spend $20,000 for all of the required improvements. After construction and installation of all improvements, the assets will be capitalized at a cost of $20,000, offset by an incentive credit of $10,000 from the property owner. Summary Definition
Define Leasehold Improvements: