Using Excel for Lease Accounting Cost Our Client Over $28,000 dollars in Overpayments. How Much Could it be Costing You?

Show Me the Money Check Earnings Payday

You won’t believe how much we just saved a client!

We often tell you how we save our client’s money, but today, as quoted directly from Jerry Maguire, we would we would like to show you the money. In today’s post we will show you how we saved an actual client money over a small sample of 3 months. At this point we would like to thank our client that graciously allowed us to use their numbers in this post, as long as they were not identified. You know who you are, and we thank you.

We read and entered all the client’s leases into our software, then compared the payments the client made via their accounts payable system to the amounts they were supposed to make per our software from the lease documents.  Also note that we perform this analysis for all our clients, to ensure that payments are accurate. The following is the summary we sent the client, verbatim.

To continue reading, click here.

About LeaseQuery:  LeaseQuery is lease management software that helps companies manage their leases.  Rather than relying on excel spreadsheets, our clients use LeaseQuery to get alerts for critical dates (renewals, etc), calculate the straight-line amortization of rent and TI allowances per GAAP, provide the required monthly journal entries (for both capital and operating leases) and provide the commitment disclosure reports required in the notes and the MD&A.  Contact us here.

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How To Transition From Current to the New Lease Accounting Rules: A Comprehensive Example.

Hello I'm in Transition Change Evolving Name Tag Words

This week’s blog is a comprehensive example explaining how to transition from current GAAP to the new lease accounting standards. We will be using a real life scenario that one of our clients graciously allowed us to use as an example.  We have a lot to cover, so let’s get right to it.

Assume a Tenant signs a lease document with the following predicates:

Lease Term: A term commencing on April 1, 2016 (Commencement Date) and continuing for one-hundred-twenty (120) full calendar months. Tenant shall be granted access to the Premises sixty (60) days prior to the Commencement Date to install equipment and furnishings (the “Early Access Period”). Such access shall be subject to all the terms and conditions of this Lease, except that the Commencement Date and the payment of Rent shall not be triggered thereby. 

TI Allowance: The tenant received a Tenant Improvement Allowance of $1.2 Million as an incentive to sign the lease from the landlord.  The landlord paid the contractor directly for the construction of the Improvements. The improvements were constructed prior to the Early Access Period.

Moving Expenses: The tenant also received a reimbursement of $30,000 in moving expenses from the landlord.

Base Rent: Per the lease document, the rent commencement date is 3 full calendar months after the tenant opens for business at that location. Base rent is $205,000/month; with annual increases on the anniversary of the rent commencement date of 3%.

Assumptions: Assume that the lease is classified as an operating lease, assume that the tenant is a public company, assume that the rate inherent in the lease is unknown, and the fair value of the building is $300 Million. Assume the Tenant opened for business at the location on June 1, 2016. Assume that if the company tried to borrow $300 Million (to purchase the building) its borrowing rate would be 9% in 2019, but if the company tried to borrow $27 Million (the amount of the total lease payments) its borrowing rate would be 6% in 2019.

Here are the steps to take to transition from Current GAAP to the new lease accounting standards issued by the FASB:

To continue reading, click here.

About LeaseQuery:  LeaseQuery is lease management software that helps companies manage their leases.  Rather than relying on excel spreadsheets, our clients use LeaseQuery to get alerts for critical dates (renewals, etc), calculate the straight-line amortization of rent and TI allowances per GAAP, provide the required monthly journal entries (for both capital and operating leases) and provide the commitment disclosure reports required in the notes and the MD&A.  Contact us here.

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How to Create a Lease Liability Amortization Schedule Under New Lease Rules

Amortization Schedule

Last week’s blog focused on one important thing: How to calculate the present value of lease payments using excel spreadsheets. This week, we will show you how to calculate the present value of minimum lease payments AND prepare the liability amortization schedule for the lease liability in the same step, using excel. Let us stress that this information is important not just for companies that plan on continuing to use excel spreadsheets for lease management. It is also a useful tool for those of you that plan on using lease accounting and lease management software, as you can use the information in this blog to ensure that your chosen software provider is actually performing this calculation accurately.  So basically, with the method we explain below, you will have everything you need to comply with the new lease rules powered only by an excel spreadsheet. Next week’s blog will feature a comprehensive example of how to transition from current lease accounting rules to the new lease accounting standards, and we will be referencing the methods utilized in this blog for our calculations.  For now, here are the steps to follow to calculate the present value of lease payments AND the lease liability amortization schedule using excel, when the payment amounts are different.

To continue reading, click here.

About LeaseQuery:  LeaseQuery is lease management software that helps companies manage their leases.  Rather than relying on excel spreadsheets, our clients use LeaseQuery to get alerts for critical dates (renewals, etc), calculate the straight-line amortization of rent and TI allowances per GAAP, provide the required monthly journal entries (for both capital and operating leases) and provide the commitment disclosure reports required in the notes and the MD&A.  Contact us here.

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Using Excel to Calculate Present Value of Minimum Lease Payments

NPV for excel

This is the ONE thing you MUST be able to do under the new lease accounting rules:
The new lease accounting rules require the vast majority of leases to be capitalized, and the capitalized amount is calculated as the present value of the lease payments. It goes without saying, therefore, that to comply with the new lease standard, you will need to know how to calculate the present value of lease payments. This is especially true if you do not plan on using software, and plan on continuing to use excel spreadsheets to manage your leases. While we think managing your leases in excel is a bad idea (see our post about that here), if you choose to use excel, we can at least help you use it correctly. 

To continue reading, click here.

About LeaseQuery:  LeaseQuery is lease management software that helps companies manage their leases.  Rather than relying on excel spreadsheets, our clients use LeaseQuery to get alerts for critical dates (renewals, etc), calculate the straight-line amortization of rent and TI allowances per GAAP, provide the required monthly journal entries (for both capital and operating leases) and provide the commitment disclosure reports required in the notes and the MD&A.  Contact us here.

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Accounting for Subleases under GAAP: The CORRECT way

Accounting-for-Subleases

Have you ever leased a space, decided you no longer require it, then subleased the space to a third party? Did you continue making payments to the landlord under the initial lease while collecting payments from the third party under the sublease? Did you account for this transaction correctly under GAAP? Are you willing to bet on it? Better yet, are you willing to bet your job on it?

We are. We are willing to bet that if you have a Sublease, YOU’RE ACCOUNTING FOR IT INCORRECTLY. In this blog, we will explain the correct accounting for subleases under current GAAP, using a comprehensive example with actual numbers. We write detailed blogs like this to demonstrate that our experts at LeaseQuery are not just real estate professionals, but lease accounting experts. We understand the challenges faced by real estate professionals AND accounting departments. Our lease management software reflects our expertise.

To continue reading, click here.

About LeaseQuery:  LeaseQuery is lease management software that helps companies manage their leases.  Rather than relying on excel spreadsheets, our clients use LeaseQuery to get alerts for critical dates (renewals, etc), calculate the straight-line amortization of rent and TI allowances per GAAP, provide the required monthly journal entries (for both capital and operating leases) and provide the commitment disclosure reports required in the notes and the MD&A.  Contact us here.

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