Sublease
A lease in which the original lessee (as intermediate lessor) leases the underlying asset, or part of it, to another party.
Definition
A sublease arises when a lessee grants another party the right to use all or part of an underlying asset that the lessee itself holds under a head lease. The original lessee becomes both a lessee (under the head lease) and a lessor (under the sublease). Under IFRS 16, the intermediate lessor classifies the sublease as either an operating lease or a finance lease by reference to the right-of-use asset arising from the head lease rather than the underlying asset itself.
Why it matters
Subleases add complexity to lease accounting as the entity must account for both sides of the arrangement — as lessee and as lessor. Disclosure requirements include the income from subleases and the maturity of sublease receivables.
In AuditLease
Sublease disclosures are a planned later-phase enhancement to AuditLease. Users who sublet space should note that the current platform handles the head lease position only.
Related terms
Put this into practice with AuditLease
AuditLease handles IFRS 16 and FRS 102 lease calculations, statutory note generation, journal entries, and audit evidence, so your team spends less time on spreadsheets and more time on judgements.
This definition is for general information only and is not accounting or legal advice. Definitions are based on IFRS 16, FRS 102, and associated guidance published by the IFRS Foundation and the Financial Reporting Council. Users should refer to the applicable accounting standards and their professional advisers for judgement-specific matters.