I would be happy to sit down and map out a process for documenting this for your clients. My initial thoughts are that you have to consider:
- What are the economic incentives to extend the lease or not opt to terminate?
- What are the client’s future commercial office needs (historic growth, projected growth, etc.)?
- Does this office space accommodate these future needs?
- Are there other trends or industry issues that might affect their needs?
– Based on the above (not meant to be all inclusive), does the office meet their future needs and are the economic incentives strong enough that they would lead one to believe that it is reasonably certain that an extension will be executed keeping in mind the high threshold criteria of meeting this requirement.
I think the standard was written in this way to provide for more wide use in various industries and situations.”
At Colliers Alabama, we are making an effort to get together with our clients after their accounting teams have had a chance to consider this issue themselves and come up with a go-forward approach to lease renewal options to ensure that we are getting them the flexibility they need without adversely affecting their financial statements. We know that it is important to them to stay in front of this and other industry issues so as not to be the recipients of unwelcome surprises.