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Real Estate Portfolio Management / Lease Administration / Lease Portfolio / Extension for Lease Accounting

Report International Leases Consistent with FASB ASC 830

Note: For background information, refer to: FASB Accounting Standards Codification Topic 830, Foreign Currency Matters.

Requirement

FASB ASC 830 requires that asset and liabilities contracted in a foreign currency be remeasured every reporting period to determine if the fluctuations in exchange rate should result in a declared gain or loss. For instance, if you sign a lease in London denominated in GBP and your US-based organization's functional currency is USD, you need to re-measure the lease each reporting period.

Method 1 - Use USD

Yearly Reporting

If you have few leases outside the US, you will likely want to make an exception for the few costs you need to manage for those leases rather than enable the ARCHIBUS Enhanced Global Feature Set (multi-currency support) for all costs throughout ARCHIBUS.

To enter the initial lease:

1. First, verify that multi-currency features of ARCHIBUS are off using the System Administration / ARCHIBUS System Administration / ARCHIBUS Administrator - Application Configuration / Enable-Disable VAT and Multicurrency task.
2. Manually convert lease costs to USD using the rate effective at the time you enter these costs into ARCHIBUS. For instance, if the monthly base rent is GBP 1,000 and the exchange rate at the Commencement Date is 1.34, enter USD 1,340 as the monthly base rent.
3. Classify the lease per usual.

When re-measuring the lease for each reporting period:

1. Use a Commencement Date at the end of the reporting period. Enter a new recurring cost representing the fluctuation in currency. For instance, if the exchange rate increases to 1.38, enter ( GPB 1000 * 1.38 ) = USD 40 as a new, additional recurring base rent cost for this lease.
2. Submit the lease to be re-evaluated and then re-evaluate the lease, just as you would for any other modification.

The program:

• regenerates the amortization schedule starting at the new Commencement Date.
• shows any gain or loss in the sub-ledger entries.

Frequent Reporting

If you generate this information monthly:

1. Enter and maintain currency conversion rates in the ARCHIBUS Currency Conversions (afm_conversions) table using the System Administration / ARCHIBUS System Administration / ARCHIBUS Administrator - Application Configuration / Define Exchange Rates task.
2. Write a Basic Rules Wizard script that lists the leases denominated in foreign currencies.
   •  For each lease, it:
     • finds the exchange rate at the Lease Start Date.
     • finds the exchange rate at the current date.
   • For each cost record, it adds a cost record representing the increase or decreased costs (i.e. the difference in rate times the original value).
   • Updates the Classification Date to the current date, regenerates the amortization schedule, and approves the new schedule.

With this script, the program will show any gain or loss in the sub-ledger entries.

Method 2 - Use ARCHIBUS Multi-currency Features

If you frequently manage multiple currencies, use the multi-currency features of ARCHIBUS and record your leases per Record Leases Contracted in Multiple Currencies.

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