Company: CIO
Filing Date: 2025-02-20
Form Type: 10-K
Source: 0000950170-25-023714
Chunk: 12

Company: City Office REIT, Inc.
Filing Date: 2025-02-20
Form: 10-K
Item: Item 15
Chunk 12
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 are no further obligations under the lease. Otherwise, such fees and balances are recognized on a straight-line basis over the remaining obligation period with the termination payments being recorded as a component of rent receivable-deferred or deferred revenue on the consolidated balance sheets. If the Company funds tenant improvements and the tenant improvements are determined to be owned by the Company, revenue recognition will commence when control of the space is turned over to the tenant. Tenant improvements are deferred and amortized on a straight-line basis over the lease term. If the Company determines that the tenant allowances are lease incentives, the Company commences revenue recognition when possession or control of the space is turned over to the tenant for tenant work to begin. The lease incentive is recorded as a reduction of lease revenue on a straight-line basis over the lease term. Recoveries from tenants for real estate taxes, insurance and other operating expenses are recognized as revenues in the period that the applicable costs are incurred. The Company recognizes differences between estimated recoveries and the final billed amounts in the subsequent year. Final billings to tenants for real estate taxes, insurance and other operating expenses did not vary significantly as compared to the estimated receivable balances. 

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 Leases The Company classifies leases as a sales-type, direct financing, or operating lease and recognizes leases on-balance sheet where it is the lessee. The Company determines if an arrangement is a lease at inception. Operating and financing right-of-use assets and lease liabilities are included within other assets and other liabilities on the consolidated balance sheets. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. Right-of-use assets include any prepaid lease payments and exclude any lease incentives and initial direct costs incurred. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The lease terms may include options to extend or terminate the lease if it is reasonably certain the Company will exercise that option. For lease agreements with lease and non-lease components, the Company accounts for the components as a single combined lease component.Real Estate Properties Real estate properties are stated at cost less accumulated depreciation, except land. Depreciation is