For finance leases, include options likely to be exercised. Extend the amortization schedule to include the length of the option. When calculating the present value of the lease liability, take into account the schedule of payments (e.g. by month or by year) for the option.
Suppose you have a 10-year lease starting in 2020. You have a three-year option that is reasonably certain to be exercised.
Field | Value |
---|---|
Start Date | 1/1/2020 |
End Date | 12/31/2029 |
Field | Value |
---|---|
Cost Category | RENT - BASE RENT |
Check Cost Dates Match Lease? | 12/31/2029 |
Period | Month |
Start Date | 1/1/2020 |
End Date | 12/31/2029 |
Field | Value |
---|---|
Option Type | RENEWAL |
Date Exercising Applicable | 1/1/2030 |
Is reasonably certain? | Yes |
Description | describe the option |
Note: Leave the Cost - Estimated field blank. Since this is not a one-time cost, you will track this as a recurring cost. For information, see Concept: Lease Costs and Option Costs.
Note: If an option "is reasonably certain" to be exercised, mark it as such. If you change an option, and the lease is already has a workflow status of "Submitted for Approval" or "Approved", then the Lease Classification Wizard will capture your comments on the change for the audit log, log the change, and flag the lease for Re-evaluation.
Field | Value |
---|---|
Cost Category | RENT - BASE RENT |
Period | Month |
Start Date | 1/1/2030 |
End Date | 12/31/2032 |
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