Theory and Practice
✔Applies to US GAAP (ASC 842) Finance Leases
✔ Applies to US GAAP (ASC 842) Operating Leases
✔ Applies to IFRS (IFRS 9)
✔ Applies to UK GAAP (FRS 102)
Non-refundable deposits or upfront fees (e.g., a non-refundable “processing fee” paid to the lessor) would be treated as part of the lease cost under all standards – often added to the ROU asset (if considered an initial direct cost or prepayment) and included in the lease liability if it’s effectively an unavoidable payment for the lease.
| Account | Debit | Credit |
|---|---|---|
| ROU Asset | $10,000 | |
| Cash | $10,000 | |
| The fee is capitalized into the ROU asset cost (and thus will be expensed via depreciation). No separate liability, since it’s paid immediately and is not refundable. | ||
Doing it in Sage Intacct Lease Accounting
Treat the non-refundable deposit as another Lease Payment.