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Lease Accounting Schedule Termination - Common Procedure

This article describes how to terminate lease accounting schedules in Lucernex.

ClosedPartial and Full Contract Termination

When you re-measure or terminate a lease and you are going to recalculate your accounting schedules, you can allocate appropriate portions of the Remeasurement Balance Forward to remain on the balance sheet or to be counted as a capital gain/loss (profit & loss impact). This change applies to real estate contracts and lease-level schedules for equipment contracts. A common use case is a change in square footage, the closure of a store, or the retirement of some fraction of equipment assets.

When an active schedule is recalculated or terminated, the Inactive Date of the previously active schedule will automatically populate with the date of recalculation or termination.

The system prorates your termination schedule as of the day prior to the day of termination. For example:

  • If you terminate your schedule as of January 15th, the system will include accounting values for all days in the period up to the 14th.

  • Likewise, if you terminate your schedule as of January 21st, the system will include accounting values for all days in the period up to the 20th.

ClosedPartial Lease Termination

To perform a partial lease termination:

  1. Navigate to one of fifteen pages:

    • Contract > Accounting Info > ASC 842 Test

    • Contract > Accounting Info > ASC 842 Rent Schedule

    • Contract > Accounting Info > IFRS 16 Rent Schedule

    • Contract > Accounting Info > GASB 87 Rent Schedule

    • Contract > Accounting Info > Accounting Assumptions

    • Contract > Accounting Info >Accounting Assumptions > IFRS 16 Accounting Assumptions

    • Contract > Accounting Info >Accounting Assumptions > GASB 87 Accounting Assumptions

    • Equipment Contract > Accounting Info > ASC 842 Test

    • Equipment Contract > Accounting Info > ASC 842 Test > Equipment Assumptions / ASC 842 Tests

    • Equipment Contract > Accounting Info > ASC 842 Rent Schedule

    • Equipment Contract > Accounting Info > IFRS 16 Rent Schedule

    • Equipment Contract > Accounting Info > GASB 87 Rent Schedule

    • Equipment Contract > Accounting Info > Accounting Assumptions

    • Equipment Contract > Accounting Info > Accounting Assumptions > IFRS 16 Accounting Assumptions

    • Equipment Contract > Accounting Info > Accounting Assumptions > GASB 87 Accounting Assumptions

  2. Click Calculate Schedule in the Actions menu on the right side of the page.

    A Create New Schedule window opens.

    The Start Date of your new schedule is the day after your last posted period.

  3. If there is a change in value in the underlying asset, enter either a percentage value in the P&L Impact percentage field or a negative fixed dollar amount in the P&L Impact fixed dollar amount field.

    If there is no change in the underlying asset, you do not need to allocate any of the Remeasurement Balance Forward to P&L Impact.

    Important!

    The P&L Amount requires a negative value because it is a percentage of the Remeasurement Balance Forward field, which is also negative.

    This amount will be held back from your new schedule and posted to a field (SLSummary.ProfitAndLossImpact) which can be fed to an ERP integration as a GL entry. The system will automatically calculate the appropriate fixed amount or percentage; depending upon which field you enter a value.

    Note:

    You can allocate 100% of your remeasurement balance forward to your profit and loss impact without terminating your lease accounting schedule. This functionality supports the use case where you might want to impair the asset or write off the existing balance forward.

  4. Make any other changes to your schedule data as necessary.

  5. Click Create Schedule.

    The window closes. The new schedule appears in the Rent Schedule List.

ClosedFull Lease Termination

To perform a full lease termination:

  1. Navigate to one of fifteen pages:

    • Contract > Accounting Info > ASC 842 Test

    • Contract > Accounting Info > ASC 842 Rent Schedule

    • Contract > Accounting Info > IFRS 16 Rent Schedule

    • Contract > Accounting Info > GASB 87 Rent Schedule

    • Contract > Accounting Info > Accounting Assumptions

    • Contract > Accounting Info >Accounting Assumptions > IFRS 16 Accounting Assumptions

    • Contract > Accounting Info >Accounting Assumptions > GASB 87 Accounting Assumptions

    • Equipment Contract > Accounting Info > ASC 842 Test

    • Equipment Contract > Accounting Info > ASC 842 Test > Equipment Assumptions / ASC 842 Tests

    • Equipment Contract > Accounting Info > ASC 842 Rent Schedule

    • Equipment Contract > Accounting Info > IFRS 16 Rent Schedule

    • Equipment Contract > Accounting Info > GASB 87 Rent Schedule

    • Equipment Contract > Accounting Info > Accounting Assumptions

    • Equipment Contract > Accounting Info > Accounting Assumptions > IFRS 16 Accounting Assumptions

    • Equipment Contract > Accounting Info > Accounting Assumptions > GASB 87 Accounting Assumptions

  2. Click Calculate Schedule in the Actions menu on the right side of the page.

    A Create New Schedule window opens.

  3. Select the Terminate Schedule tab.

    Your Begin and End Date, Schedule Type, and P&L Impact value should pre-populate on the page. In this case, the entire amount of the Remeasurement Balance Forward will populate the P&L Impact field, and it will be uneditable.

  4. Select the appropriate creation reason from the Creation Reason field.

  5. Enter any notes in the Notes field.

  6. Click Create Schedule.

    A dialog opens, asking you to confirm your choice.

  7. Click Yes.

    A new schedule appears in the Rent Schedule List, where all values are listed as $0.00. This is a single-period schedule that is created to close out the prior accounting schedule, so that ERP integrations can close the balance sheet for this schedule.

ClosedImportant Note About Full Lease Termination

The above procedures describe only how to close out the accounting schedules for a terminated lease. If the lease is being fully terminated you will still need to update your Payment End Date at the lease level so that no new rent payments will be generated.

To update your payment end dates:

  1. Do one of the following:

    • Navigate to Contract > Details > Summary using the tabs at the top of the page.

    • Navigate to Equipment Contract > Details > Summary using the tabs at the top of the page.

  2. Click Edit link in the Actions menu on the right side of the page.

    The page becomes editable.

  3. Scroll down to the Critical Dates section of the page.

  4. Change the Payments End Date to the end date of your schedule.

  5. Click Save Changes.

    This displays in the Actions menu on the right side of the page.

    The page refreshes. Your changes are saved.

ClosedAsset Schedule Termination

This section describes the options available in the system for terminating asset schedules.

ClosedSingle Asset Termination

To terminate a single asset schedule:

  1. Choose between three options:

    • Navigate to Equipment Contract > Accounting Info > ASC 842 Rent Schedule

    • Navigate to Equipment Contract > Accounting Info > GASB 87 Rent Schedule

    • Navigate to Equipment Contract > Accounting Info > IFRS 16 Rent Schedule

      Use the links in the Navigation Pane on the leftmost side of the page.

  2. Select the equipment whose schedule you want to terminate from the Equipment Schedules List.

  3. Click Calculate Schedule in the Actions menu on the right side of the page.

    The Create New Rent Schedule window opens.

  4. Select the Terminate Equipment Schedule tab.

    The Terminate Equipment Schedule tab opens.

    If you did not open the Equipment Schedules page in Step 3, a message will appear which reads: No Equipment to Terminate.

    The Equipment Name will appear below the Creation Reason field. The Begin Date, End Date, Type, and P&L Impact fields will pre-populate.

  5. Select the reason you are creating the termination schedule from the Creation Reason field.

  6. Enter any notes about the termination schedule in the Notes field.

  7. Click Create Schedule.

    The window closes. The termination schedule appears in your Equipment Schedules List.

ClosedBulk Termination

Bulk termination is controlled on the Create Equipment Schedules tab of the Create New Rent Schedule window.

When you generate your asset schedules, any asset schedules with the Recalc? flag set to Yes will be recalculated. One of the recalculation triggers for an asset schedule is if the value of the Operational Status on the asset’s accounting assumptions record is anything other than Active. When you generate or recalculate your asset schedules, the system will ask: Since last schedule creation, some assets have changed to non-Active status. Do you want to terminate the asset schedules for them?

The system behaves as follows:

Dialog box response

Asset Operational Status

Recalc flag?

Action on that asset schedule

Yes

Active

N

No action

Yes

Active

Y

Recalculate

Yes

Not Active

Y

Terminate

No

Active

N

No action

No

Active

Y

Recalculate

No

Not Active

Y

No action

ClosedBulk Termination Example

As an example, if you recalculated the following asset schedules:

  • 100 active assets that have the Recalc? flag triggered by an expense schedule change and

  • 25 non-active assets that have the Recalc? flag triggered by a change in operational status,

Then:

  • Clicking Yes will recalculate the schedules for the 100 active assets and terminate the 25 non-active assets

  • Clicking No will recalculate the schedules for the 100 active assets and do nothing to the schedules for the 25 non-active assets

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