Lease Accounting when Tenant Must Return the Asset to its Initial Condition.

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Have you ever entered into an operating lease for a building, constructed leasehold improvements, and determined based on the provisions of the lease that you are legally obligated to remove the leasehold improvements at the end of the lease? 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?

Our last blog addressed how to account for leases where the tenant has the option to terminate the lease at will (without penalty).  In this blog post we will explain how to account for a lease when the tenant/lessee has an obligation to return the asset back to its condition at the inception of the lease. We will begin by explaining the accounting treatment under GAAP, followed by a comprehensive example using actual numbers.

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.

Straight-line calculation for leases where tenant is required to expand in future (Must Takes)

Planned Expansion and Growth of a Company

In our last blog, we addressed accounting for leases when a lessee is granted access to a part of a building at first and then granted access to the rest of the building at a later date. This week’s blog addresses a similar situation: Accounting for leases when a tenant signs a contract that legally requires the tenant to expand the leased premises by a pre-determined amount at a later date. This scenario is called a “Phase in” or “Must Take” in real estate circles. For instance, a tenant could sign a lease for a building where the tenant occupies the first floor in year one, but MUST also lease the second floor in the second year. As we stated in our last blog, under current GAAP rules, the FASB states that if rents increase because the tenant gets access to additional property, then rent expense should be allocated proportionally to the fair value of the additional property. As we always do here at LeaseQuery, let’s simplify the accounting with an example.

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.

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.

How to Account for Tenant Improvement Allowances Under GAAP

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In this post I will explain the correct way to account for tenant improvement allowances and other lease incentives under current GAAP lease accounting rules.  Note that incentives refer to any payments made by the landlord to (or on behalf of) the tenant. This includes reimbursements for moving expenses, payments for tenants to break existing leases, and payments for tenant improvement allowances (even if the tenant never receives cash and simply submits invoices to the lessor for a prescribed amount of leasehold improvements that the lessor has agreed to fund).
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.

 

Effective Date SET for New Lease Accounting Rules!!!

FASB

On November 11, 2015, the FASB set the effective date for the proposed new leasing standard; it is effective in 2019 for public companies and 2020 for private companies. Early adoption is permitted. The final standard is to be published in early 2016.

Click here to continue reading.

About LeaseQuery:  LeaseQuery is lease accounting 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.  Visit us at www.LeaseQuery.com