What is Round Tripping?
Adrian, answering simply to your lease scenario – As a forensic CPA, I see these done hundreds of times, some legitimately and others not. Owner lessor leases property to lessee at agreed terms, duration and price along with some outside arrangement to modify or disregard own agreement which undermines the expected revenue leasing stream of income (cancellation, givebacks, returns and allowances etc.) For instance, your lessee permitted to sublet to other lessees and for which lessor maybe required to incur additional costs outside of the original written lease contract – say lessor pays for subletee’s capital improvement costs, normally not necessary per the original lease contract. This may be done in small business deals where there are no harms caused to closely held companies. However, these round tripping deals may not be proper for public type of companies, required to follow GAAP reporting. Round-tripping pumps up company’s market capitalization for a short time to help energy
