Theory and Practice
✔ Applies to US GAAP (ASC 842) Finance Leases
✔ Applies to US GAAP (ASC 842) Operating Leases
✔ Applies to IFRS (IFRS 16)
✔ Applies to UK GAAP (FRS 102)
A 2-year building lease with monthly payments of $10,000 and a lessee’s incremental borrowing rate of 4.75% yields a present value of lease payments (lease liability) of $229,617.19.
At commencement:
| Account | Debit | Credit |
|---|---|---|
| ROU Asset | $229,617.19 | |
| Lease Liability | $229,617.19 | |
| Record initial recognition of ROU asset and lease liability at present value of $10k/month payments for 5 years at 4.75%. | ||
Doing it in Sage Intacct Lease Accounting
For US GAAP Finance Leases, IFRS Leases and UK GAAP Leases, set up a Lease Class as described here; or for US GAAP Operating Leases, follow the steps described here. Ensure that the Disable GL Posting checkbox is NOT selected.
Create a Lease using the newly created Lease Class and follow the Lease Lifecycle until the lease has the Workflow Status of “In Service”.
Once the Lease has been placed in Service, browse to General Ledger> All>Journal Entries and find the journal created. It should display entries as follows:
