7.2.2 Example - Lease Incentive on Operating Lease (ASC 842) — Sage Intacct Technical Solutions

✘ Does not apply to US GAAP (ASC 842) Finance Leases

✔ Applies to US GAAP (ASC 842) Operating Leases

✘ Does not apply to IFRS (IFRS 16)

✘ Does not apply to UK GAAP (FRS 102)

A lessee receives a $50,000 cash incentive on an operating lease. At lease commencement:

  
      Account
      Debit
      Credit
    
       Cash
      $50,000
      
      Deferred Lease Incentive
      
      $50,000
    
      Record the incentive received as a liability (obligation to provide reduced rent in the future). No Income Statement impact on Day 1.

Over the lease term (e.g., 5-year lease, amortize $50k straight-line: $10k per year):

  
      Account
      Debit
      Credit
    
       Deferred Lease Incentive
      $10,000
      
      Lease Expense
      
      $10,000
    
      Amortize the deferred incentive to the Income Statement over the lease term, reducing the rent expense by $10k each year. The net rent expense each period is lower because of the incentive.

Doing it in Sage Intacct Lease Accounting

This is typically achieved by creating the required GL Entries, or
By creating a separate lease for the incentive at a 0% discount rate.