Summary of Interpretation No. 27

Accounting for a Loss on a Sublease—an interpretation of FASB Statement No. 13 and APB Opinion No. 30

Summary

This Interpretation clarifies that recognition of a loss by an original lessee who disposes of leased property or mitigates the cost of an existing lease commitment by subleasing the property is not prohibited by FASB Statement No. 13, Accounting for Leases.

This Interpretation also clarifies the treatment of a sublease that is part of a disposal of a segment. The determination of a gain or loss on disposal of the segment, under the provisions of APB Opinion No. 30, Reporting the Results of Operations, comprehends amounts related to an original lease and a sublease entered into as part of the decision to dispose of the segment. Any gain or loss on the sublease becomes an indistinguishable part of the gain or loss on the disposal.