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)
When the situation is reversed (e.g., the lessee initially assumed a 10-year term but now plans to terminate after 5 years), the lease liability would be remeasured to reduce it (removing future payments beyond Year 5). The entry at the date of change (with a new discount rate) might be:
| Account | Debit | Credit |
|---|---|---|
| Lease Liability | $200,000 | |
| ROU Asset | $200,000 | |
| Reduce lease liability to remove payments no longer expected (due to shorter term), and reduce the ROU asset by the same amount). If the reduction in the ROU asset exceeds its carrying value (or if other adjustments apply), any excess would be recognized as a gain (credit) in Income Statement. | ||
Doing it in Sage Intacct Lease Accounting
Take the lease Out of Service
Edit the Lease, change the End Date, and Save.
Generate Payment Schedules, Add, Remove, or Import further Payment Changes.
Revalue the Lease.
Place the Lease back in Service.