Lease-In and Lease-Out: Connecting SAP CLM and RAR

Many companies are both lessee and lessor. They lease equipment from a manufacturer or financing partner and lease it out to their own customers. They rent buildings and sublease parts of them. Or they lease assets that are then used to provide services under customer contracts.

In these cases, the same asset appears in two contracts: one as lessee (lease-in) and one as lessor (lease-out). In SAP, the accounting for these two sides can be split between two solutions: SAP Contract and Lease Management (CLM) for lessee accounting and SAP Revenue Accounting and Reporting (RAR) for lessor accounting.

Two Perspectives on the Same Asset

As lessee (lease-in):

The company recognizes a right-of-use asset and a lease liability, and records interest and depreciation (or, under ASC 842 operating leases, a single lease cost).

As lessor (lease-out):

The company classifies the lease as operating or finance lease. For an operating lease, it recognizes lease income. For a finance lease, it derecognizes the asset – or, in a sublease, the right-of-use asset – and recognizes a lease receivable and interest income.

Why the Link Matters

Without a connection between the two sides, several questions are difficult to answer:

• Which leased-in asset is leased out to which customer?

• Is the outgoing lease a sublease, and how is it classified?

• What is the margin between lease-in costs and lease-out income per asset?

• What happens to the outgoing lease if the incoming lease is modified or terminated – and vice versa?

Sublease Classification

For subleases, classification differs between the standards:

• IFRS 16: an intermediate lessor classifies the sublease by reference to the right-of-use asset from the head lease, not the underlying asset.

• ASC 842: an intermediate lessor classifies the sublease by reference to the underlying asset.

This means the same sublease can be classified differently under US GAAP and IFRS. For a finance sublease under IFRS 16, the intermediate lessor derecognizes the right-of-use asset and recognizes a net investment in the sublease.

How CLM and RAR Can Work Together

CLM for lessee accounting

Incoming lease contracts are managed and valued in CLM: right-of-use assets, lease liabilities, interest, depreciation, and payments.

RAR for lessor accounting

Outgoing leases are processed in RAR, often together with service, warranty, and other components in a bundled customer contract. RAR handles allocation, classification-dependent accounting, and – if designed accordingly – the interest and principal split for finance leases.

The link between them

A reference between the asset or contract in CLM and the customer contract in RAR connects both sides. This enables:

• tracking which assets are leased out,

• triggering accounting effects on the lease-in side when an asset is subleased (for example, derecognition of the right-of-use asset for a finance sublease under IFRS 16),

• analyzing profitability per asset or contract,

• handling changes consistently on both sides.

The link is typically not available out of the box and requires solution design based on the company's processes.

Typical Scenarios

• Equipment leasing businesses that refinance assets through head leases.

• Companies offering equipment-as-a-service using leased assets.

• Real estate subleases, where parts of leased buildings are rented to third parties.

• Intercompany structures, where one entity leases assets and another leases them out.

Design Considerations

• Define the leading object: asset, contract, or both.

• Clarify classification rules for subleases under each accounting principle.

• Align contract terms and modification processes between lease-in and lease-out.

• Design reconciliation between CLM, RAR, asset accounting, and the general ledger.

Related Articles

• What Is SAP Contract and Lease Management?

• Lessee Accounting under ASC 842 / IFRS 16 with SAP CLM

• Operating Lease vs. Finance Lease Lessor Accounting in SAP: Standard vs. Custom

The Bottom Line

When companies lease assets in and lease them out, lessee and lessor accounting are two sides of one business. SAP CLM covers the lessee side, SAP RAR the lessor side. Connecting them creates transparency, supports correct sublease accounting, and allows companies to manage their leasing business as a whole.

Managing lease-in and lease-out in SAP? Talk to our experts.