posted on 06-06-2019

Leasehold

Updated October 1, 2019

What is a Leasehold?

Leaseholds designate which assets aren't really the lessee's property. Accordingly, these are assets that companies must account for them in particular ways.

How Does a Leasehold Work?

For example, let's say that Company XYZ leases a widget-making machine from Company ABC. It pays $2,000 a month to lease the asset. It also pays $1,000 a month to lease two delivery vehicles, $3,500 a month for office space, and $400 a month for a couple of billboards around town. These are Company XYZ's leaseholds.

Leaseholds can also be for cars, manufacturing equipment, office space, photocopiers, musical instruments, solar panels, or virtually any other asset. Generally, leases are handy when one party has the capital to purchase the asset and another party does not have the capital to do so but would like access to the asset.

Why Does a Leasehold Matter?

A leasehold is an accounting category that contains leased assets.