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Leasehold Improvement

Definition of "Leasehold improvement"

Upgrading made by a lessee to leased property. Examples are paneling and wallpapering. These improvements revert to the lessor at the expiration of the lease term. As improvement costs are incurred under an operating lease, the leasehold improvement account is charged. The leasehold improvement is amortized to expense over the shorter of the life of the improvement or the remaining lease term. If there is a lease renewal option and the prospect of renewal cannot be predicted with certainty, the amortization period should be the original lease term rather than the longer possible term. The amortization expense on a leasehold improvement is not tax deductible. Leasehold improvement is usually considered an intangible asset, because the lessee does not own the leased property.

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