Record an option for an improvement that is reasonably certain to be exercised or that has been exercised
This procedure outlines recording an improvement 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, 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.
- 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:
The Audit Log shows any changes to the options.
The Audit Log shows the new values of the Lease, as of the Lease Manager's approval.
The Options table shows the modifications and the effective dates.
The amortization schedule includes:
It is the difference between the two schedules that the program uses to calculate the gain or loss.
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