Record an option for space expansion or contraction that is reasonably certain to be exercised or that has been exercised
This procedure outlines recording an expansion option that meets one of the following conditions:
The procedures for the two use cases are identical. The only difference is that in the second case when the Lease Manager exports lease costs to the general ledger, the export will contain extra line items representing a gain or loss.
For finance leases, when calculating options likely to be exercised, the option is added to the ROU Asset and lease liability and amortized over the life of the lease.
If the value of the ROU Asset and liability was previously reported on the books for previous years or quarters, calculate the gain or loss resulting from this asset re-evaluation.
Field | Value |
---|---|
Option Type | EXPANSION |
Date Exercising Applicable |
1/1/2030, for example. Use the Date Exercising Applicable, as this option may not have been exercised yet, and the Date Exercised may not be present. |
Is reasonably certain? |
Yes |
Area Involved | 100,000 sqft, for example |
Note: For a contraction, set the Option Type to CONTRACTION and modify the existing lease Base Rent to be a lower cost per month reflecting the smaller area leased. Follow the below procedure, adjusting as necessary.
Note: Leave the Cost - Estimated field blank. You will use a Recurring Cost record since this is not a one-time cost. For information, see Concept: Lease Costs and Option Costs.
Field | Value |
---|---|
Cost Category | RENT - BASE RENT |
Period | Month |
Start Date | Enter the date of expansion, for example 1/1/2022 |
End Date | Enter the end date of the lease, for example 12/31/2029 |
Amount - Expense | Enter the additional monthly rent you will pay over the remaining years of the lease for the expanded area |
- If there are any tenant improvement allowances included as part of this expansion option, enter them as separate costs with a Cost Category of LEASE - IMPROVEMENTS. Use Amount - Income rather than Amount - Expense for the cost.
- If there are other fees or costs that are permitted to be amortized over the entire lease, enter them in separate costs with Cost Category LEASE - OTHER AMORTIZED COSTS.
When the organization actual executes the option, the Lease Administrator additionally:
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