We continue our lease accounting podcast miniseries with an episode focused on embedded leases. Some arrangements to provide services or purchase inventory rely on the use of a specific asset to fulfill the contract. Even if the word “lease” doesn’t appear, the rights conveyed to the customer may still meet the definition of a lease—shifting the transaction from simply purchasing services or goods to leasing an asset. We explain why identifying an embedded lease is critical and how it can significantly impact the accounting and financial reporting for both customers and suppliers.

In this episode, we discuss:

• 1:40 – An overview of embedded leases and common arrangements
• 6:50 – Determining whether an arrangement contains a lease
• 24:07 – Allocating contract consideration to lease and nonlease components
• 34:19 – Available practical expedients
• 39:01 – Accounting and reporting implications

For more information, see chapter 2 of our Leases guide and chapter 4 and 5 of our Revenue from contracts with customers guide. You can also listen to the other episodes in this series:

• Lease accounting reset - Presentation and disclosure
• Lease accounting reset - Modifications and terminations
• Lease accounting reset – Variable rents

Be sure to follow this podcast on your favorite podcast app and subscribe to our weekly newsletter to for the latest thought leadership.

About our guests

Marc Jerusalem is a PwC National Office managing director specializing in leasing. Marc consults with clients on complex lease accounting issues and is a frequent contributor to many related PwC National Office publications.

Pat Durbin is a PwC National Office Deputy Chief Accountant. He has over 30 years of experience consulting with our clients and engagement teams on complex accounting matters, including issues related to revenue, compensation, income taxes, and inventory under both US GAAP and IFRS.

About our guest host

Guest host Diana Stoltzfus is a partner in the National Office who helps to shape PwC’s perspectives on regulatory matters, responses to rulemakings and policy development, and implementation related to significant new rules and regulations. Prior to rejoining PwC, Diana was the Deputy Chief Accountant in the Office of the Chief Accountant (OCA) at the SEC where she led the activities of the OCA’s Professional Practices Group.

Transcripts available upon request for individuals who may need a disability-related accommodation. Please send requests to us_podcast@pwc.com

Did you enjoy this episode? Text us your thoughts and be sure to include the episode name.

We continue our lease accounting miniseries with a focus on variable lease payments, an area that can significantly influence lease classification and measurement. In this episode, we explore the complexities of usage-based and index-based payments, fair market rent adjustments, in-substance fixed payments, and more – providing insights into how these variable rents affect the accounting and disclosures.

In this episode, we discuss:

• 1:12 – Fixed versus variable lease payments and their accounting implications
• 7:13 – Fair market rent adjustments
• 9:37 – In-substance fixed payments, including take-or-pay arrangements
• 15:44 – Usage-based lease payment structures
• 22:18 – Tenant improvement allowances and lease incentives
• 26:10 – Accounting for variable lease payments during lease remeasurement

For more information, see chapter 3 and chapter 5 of our Leases guide. In case you missed it – check out the other episodes in this podcast miniseries:

• Lease accounting reset - Presentation and disclosure
• Lease accounting reset – Modifications and terminations

Be sure to follow this podcast on your favorite podcast app and subscribe to our weekly newsletter to stay in the loop.

About our guests

Marc Jerusalem is a managing director in PwC’s National Office specializing in leasing. Marc consults with clients on complex lease accounting issues and is a frequent contributor to many related PwC National Office publications.

Suzanne Stephani is a director in PwC’s National Office specializing in the statement of cash flows as well as the application and interpretation of the accounting guidance related to financing and leasing transactions.

About our guest host

Guest host Diana Stoltzfus is a partner in the National Office who helps to shape PwC’s perspectives on regulatory matters, responses to rulemakings and policy development, and implementation related to significant new rules and regulations. Prior to rejoining PwC, Diana was the Deputy Chief Accountant in the Office of the Chief Accountant (OCA) at the SEC where she led the activities of the OCA’s Professional Practices Group.

Transcripts available upon request for individuals who may need a disability-related accommodation. Please send requests to us_podcast@pwc.com

Did you enjoy this episode? Text us your thoughts and be sure to include the episode name.

A video of this podcast is available on YouTube, Spotify, or PwC’s website at viewpoint.pwc.com

In this episode, we highlight the proposed amendments to IFRS S2, the climate-related disclosure standard from the International Sustainability Standards Board (ISSB). Learn how the changes aim to clarify greenhouse gas (GHG) reporting, specifically scope 3 emissions, and the potential implications they have on reporting.

In this episode, we discuss:

• 0:57 – Overview of IFRS S2, the role of the Transition Implementation Group, and what’s driving the amendments
• 3:52 – Clarifying the definition of scope 3 category 15 (investments) emissions
• 12:23 – Industry classification requirements for entities engaging in commercial banking and insurance-related activities
• 16:28 – How to apply jurisdictional relief for GHG measurement methodology
• 19:47 – Global warming potential (GWP) values and jurisdictional relief
• 22:55 – Next steps for the exposure draft and recommendations for reporters in the interim

Looking for the latest developments in sustainability reporting?

• Refer to our publication on the ISSB’s exposure draft proposing amendments to IFRS S2
• Read PwC’s Sustainability reporting guide
• Check out other episodes in our sustainability reporting podcast series

About our guest

Marcin Olewinski is a PwC Assurance practice partner with over 20 years of experience bringing valued perspectives and insights to large clients in the energy sector. Additionally, he’s focused extensively within the National Office on greenhouse gas emissions and sustainability reporting and leads PwC’s global technical working group focused on GHG.

About our host

Heather Horn is the PwC National Office Sustainability and Thought Leader, responsible for developing our communications strategy and conveying firm positions on accounting, financial reporting, and sustainability matters. In addition, she is part of PwC’s global sustainability leadership team, developing interpretive guidance and consulting with companies as they transition from voluntary to mandatory sustainability reporting. She is also the engaging host of PwC’s accounting and reporting weekly podcast and quarterly webcast series.

Transcripts available upon request for individuals who may need a disability-related accommodation. Please send requests to us_podcast@pwc.com

Did you enjoy this episode? Text us your thoughts and be sure to include the episode name.