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This week we continue our Leasing toolkit series, digging into how to identify embedded leases in service or supply contracts.
In our Toolkit podcast series, we take a deep dive into one accounting topic each month that goes beyond the basics and into areas that require judgment. This month, we are covering leasing–a multifaceted area that generates numerous questions.
In this episode, Heather Horn was joined by Jillian Pearce and Marc Jerusalem from our National Office to dive into how to detect potential embedded leases in service or supply contracts and assess contract terms in the context of the leasing criteria.
In this episode, you will hear them discuss:
  • 1:28 - The definition of a lease
  • 4:53 - How to think about the “in exchange for consideration” part of the definition and “free” leases
  • 10:34 - The identified asset criteria and “floating” leases
  • 15:47 - The substitution rights criteria and how to assess the ability to economically benefit from substitution
  • 20:52 - Common questions on understanding the right to substantially all economic benefits criteria
  • 27:03 - The right to direct the use of the asset criteria and predetermined rights
  • 38:07 - Common examples where embedded leases are found and final advice

Want to learn more? Listen to our previous podcasts in our Leasing toolkit series on demystifying sale-leasebacks and build-to-suit arrangements, private company adoption and how to get lease measurements and modifications right.
About our guests
Jillian Pearce is a Partner in PwC's National Office, providing advice on financial instruments and other technical accounting issues to power and utilities clients. She was a Professional Accounting Fellow in the Office of the Chief Accountant at the SEC, and has over 15 years of auditing experience.
Marc Jerusalem is a 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.
About our host
Heather Horn is PwC’s National Office thought leader, responsible for developing our communications strategy and conveying firm positions on accounting and financial reporting matters. She is the engaging host of PwC’s accounting and reporting weekly podcast and quarterly webcast series. With over 30 years of experience, Heather’s accounting and auditing expertise includes financial instruments and rate-regulated accounting.
Transcripts available upon request for individuals who may need a disability-related accommodation. Please send requests to

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