Real Estate Portfolio Management / Lease Administration / Lease Portfolio / Extension for Lease Accounting
Concept: Overall Procedure for Recording and Classifying a Lease
This topic outlines the overall procedure for entering, classifying, and analyzing lease financial data.
Prerequisite: Review these concepts
FASB and IASB Accounting
Archibus Concepts
Step 1: Define rules and parameters for classification
A lease manager typically defines the underlying rules governing the classification process according to the procedures at their site.
- Define Sub-ledger Rules
- Review the parameters related to lease classification and adjust the default values as necessary using the System Administration / Archibus Administrator - Configure Application Configuration / Configure Application Parameters task. See:
Step 2: Enter building information
A staff member, typically a Lease Abstractor, enters the buildings using Real Estate Portfolio Management / Lease Administration / Background Data / Define Locations. See Defining Locations.
- Add a building and enter these fields, which the Lease Classification Wizard uses:
- Building Date Built (bl.date_bl)
- Building Age (bl.age)
- Building Value - Building (bl.value_bldg), the fair market value of the building alone, without its land.
Step 3: Enter leases and their options
A staff member, typically a Lease Abstractor, adds a lease using Real Estate Portfolio Management / Lease Administration / Lease Portfolio / Lease Portfolio Console. See Lease Portfolio Console. To classify a lease, you must enter the recurring costs (properly tagged with their cost categories), options, and option exercise dates.
- Check that leases to be classified have values for the following fields. Use the Real Estate Portfolio Management / Lease Administration / Lease Portfolio Console view to complete these fields.
- Lease End Date
- Lease Start Date
- Add Base Rent records to describe the rent schedule.
- Add Option records to describe .
See these procedures for details:
Procedures for initially entering options:
Step 4: Classify a lease
- A staff member, typically a Lease Administrator, uses the Lease Classification Wizard's automated questionnaire to classify the lease using Real Estate Portfolio Management / Lease Administration / Lease Portfolio / Lease Classification Wizard. See these topics for details:
- When finished working through the questions, route the classification for approval.
Step 5: Approve the lease classification
A staff member with appropriate authorization, usually a Lease Manager or Portfolio Manager, uses the Lease Classification Wizard's approval actions to review and then accept or reject the lease classification.
- Use the Approve action to approve the lease classification.
- Use the Reject for Re-evaluation action to comment on an observed deficiency, log the rejection, and send the classification back for review and editing.
Step 6: Review reports
The lease information can now be reported to stakeholders or used to create journal entries for accounting. See:
Ongoing: Update lease data and re-evaluate classifications
As issues change at your site, you may need to exercise right-of-use options, which might effect the lease classification. See these procedures for re-evaluating a lease and updating right-of-use options that you decide to execute during the lease term.
Note Under FASB and IASB guidelines, you do not need reclassify a lease in the middle of its term to reflect changes in building value, incremental borrowing rate, and other factors that might affect the Ratio of Initial Lease Liability Over Fair Market Value of Asset. You need to reclassify only it there is a change in right-of-use options.
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