Accounting for real estate owners has become more difficult since the pandemic broke out last year as tenants stopped paying rent, rules changed for leases, and unused office space proliferated.
Even as businesses reopen across the country thanks to the widening availability of COVID-19 vaccines, those challenges are likely to linger. In preparing their 2020 year-end financial statements, more companies that own real estate property will need to deal with questions of asset impairment, going concern evaluations, tenant receivables, the new leases standard, and accounting for Paycheck Protection Program loans.
In terms of asset impairment, the novel coronavirus pandemic would seem to qualify as a triggering event as it led to widespread losses and business closures last year across the country. A triggering event can be an event or set of circumstances resulting in losses, decreased cash flow, decreased occupancy, expiring leases or a deterioration in the environment in which an entity operates. For many businesses last year, an impairment assessment would seem to be required and there’s potential for an asset write-down.