GASB 87 Accounting Assumptions - Contract Module

Several fields are automatically populated by the system based upon the data you have entered for your contract. These procedures will only call out fields where you will need to enter data.

To configure your accounting assumptions for GASB 87:

1. Click Add Item.

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

   A new Accounting Assumptions record is created.

2. Enter the discount rate in the Discount Rate field.

   The Discount Rate is also known as the Interest Rate or Internal Borrower Rate (IBR). To learn how to select a different discount rate from the Manage Discount Rates table, see our Search for Another Discount Rate article.

3. If you want to create a linked ASC 842 accounting assumptions record, select the ASC 842 schedule type from the ASC 842 Schedule field.

   Some data will be shared between the two accounting assumptions records, but there are fields that are particular to each lease accounting method. Review the fields on both accounting assumptions pages to ensure that all the relevant data is entered.

4. Select the GASB 87 schedule type for which you want to enter assumptions from the GASB 87 Schedule field.

5. Enter the Accounting Begin Date and the Accounting End Date.

   You can also click Calendar to open the Date Picker and select the appropriate date.

   Important!

   The codification requires that you include all reasonably assured options in your accounting schedule. Therefore, we recommend that your Accounting End Date occur after the Likely Term Expiration Date. The Likely Term Expiration Date populates with the expiration date of the latest-occurring reasonably assured option set to “likely”.

   Note:

   The default value for the Accounting Begin Date for IFRS 16 or GASB 87 schedules is the later of the IFRS 16 or GASB 87 Adoption Date or the Possession Begin Date. You can override the value of the Accounting Begin Date on the Accounting Assumptions page of your contract or equipment contract.

6. To add an accounting adjustment:

   Note:

   The Accounting Assumption Adjustment section allows you to make adjustments to underlying recurring charges. For example, in real estate you might have a gross lease where base rent, base real estate taxes, base operating expenses, and base insurance are all included in one payment. In this scenario, you could create an adjustment to remove any item you do not want to include on the balance sheet.

   1. Click Add Accounting Assumption Adjustment in the Accounting Assumption Adjustments table.

      The Add Accounting Assumption Adjustment window opens.

   2. Select the accounting schedule type from the ASC 842 Schedule or the GASB 87 Schedule field.

      See the Add a New Schedule Type procedures to learn how to create a new accounting schedule type.

   3. To associate this adjustment with an Expense Setup Record:

      1. Click Search next to the Expense Setup label.

         The Select Expense Setup Record window opens.

      2. Select the check box next to the expense setup record to which you want to associate this adjustment.

      3. Click Select in the bottom-right corner of the window.

         The window closes. The Expense Setup Record and its associated data populate in the Add Accounting Assumption Adjustment window.

   4. If the expense setup has a secondary schedule allocation, enter the allocation in the Secondary Schedule Allocation field.

      Learn more about Secondary Schedule Allocations.

   5. Enter the begin date of the accounting assumption adjustment in the Begin Date field.

      You can also click Calendar to open the Date Picker and select the appropriate date.

   6. Enter the end date of the accounting assumption adjustment in the End Date field.

      You can also click Calendar to open the Date Picker and select the appropriate date.

   7. Select a proration method from the Proration Method field.

      The proration method you choose tells the system how much a “day” is worth, when your cost period does not encompass the entirety of the period.

   8. Do one of the following:

      • To calculate the payment using the Payment Amount and Frequency fields:

        1. Enter the payment amount into the Payment Amount field.

        2. Select the frequency of the payment from the Frequency field.

           The First Payment Amount, Last Payment Amount, and Annual Amount fields will auto-populate depending upon the value you enter in the Payment Amount and the frequency you select from the Frequency field.

      • To calculate the payment using the Rentable Area and Payment Rate fields:

        1. Ensure that the Rentable Area value populates. If not, you will need to enter the rentable area at the contract-level.

        2. Enter the payment rate in the Payment Rate field.

           The payment rate is a dollar value: for example, $1.00 per square foot.

   9. Enter any notes in the Notes field.

   10. Click Add.

       The adjustment appears in the Accounting Assumption Adjustments table.

7. Complete these fields:

   • PV Of Lease Incentives: Enter any incentives that have reduced the cost of the lease.

   • PV Of Other Adjustments: Enter any other miscellaneous costs that should be accounted for in the schedule.

   • Payments Before Commencement (Less Incentives): Enter the amount paid towards rent prior to the commencement date, minus any incentives that have reduced the cost of the lease.

     The Payments Before Commencement (Less Incentives) is our recommended location for inputting your cumulative deferred balance under your straight-line rent, and using it as an adjustment between the initial liability balance and the initial asset balance upon transition.

   • Initial Direct Costs: Enter the incremental costs of a lease that would not have been incurred if the lease had not been obtained. For example, broker’s fees, certain legal fees, and certain payments to tenants to move out.

   • Dismantling / Restoring Costs: Enter the cost of any activity necessary to restore the asset to its original state prior to the expiration of the lease.

   • Impairments: Enter any deductions related to the diminished value of the asset.

     Important!

     Impairments should be entered as a negative value.

8. To add an exchange rate to your accounting assumptions:

   1. Click Add Exchange Rate in the bottom-right of the Contract Specific Rates table.

      The Add Exchange Rate window opens.

   2. Select the currency codes from the From Currency and To Currency fields.

   3. Enter the Effective Date of the currency exchange rate.

      You can also click Calendar to open the Date Picker and select the appropriate date.

   4. Enter the exchange rate in the Exchange Rate field.

   5. Click Add.

      The window closes. The exchange rate appears in the Contract Specific Rates table.

      This table is used when a lease utilizes multiple currencies. Any costs entered for a contract in a currency other than your default currency for the contract will be converted using the values entered in this table. This enables reporting and the calculation of the net present value.

9. Click Save Changes.

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

   The page refreshes. A message appears below the Accounting Details tab: Successfully updated Contract.

10. Verify that your data is correct.

    Important!

    If you linked an ASC 842 schedule type to this accounting assumptions record in step 5, follow the Enter Your Accounting Assumptions for ASC 842 procedures before locking your accounting assumptions record. Once the record is locked, it cannot be edited.

11. Once you have verified that your accounting assumptions have been entered correctly and completely, select the Locked? check box to the right of the Accounting End Date field.

12. Click Save Changes.

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

    The page refreshes. A message appears below the Accounting Details tab: Successfully updated Contract. Your accounting assumptions record is locked.

To edit an unlocked accounting assumptions record:

1. Select the accounting assumptions record you want to edit from the GASB 87 Accounting Assumptions List.

2. Make your changes.

3. Click Save Changes.

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

4. If you are ready to lock your accounting assumptions record, select the Locked? check box to the right of the Accounting End Date field.

5. Click Save Changes.

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

   Your accounting assumptions record is locked.

To delete an accounting assumptions record:

1. Select the accounting assumptions record you want to delete from the GASB 87 Accounting Assumptions List.

2. Click Delete Item.

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

   A dialog opens, asking you to confirm your choice.

3. Click Yes.

   The page refreshes. The accounting assumptions record is deleted.

To learn how to complete the Accounting Assumptions - Contract Spreadsheet, follow the procedures in our Bulk Lease Accounting Data Import article.

These are generic procedures that are common across all or multiple areas of Lucernex. As such, these procedures do not call out specific navigation to the page.

To import data:

1. Click Import Data.

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

   The Upload Spreadsheet window opens.

2. Click Download Spreadsheet if you need to download a spreadsheet for import.

   The spreadsheet downloads.

3. Complete the spreadsheet.

4. Save the spreadsheet with a unique title, so that you can identify it for tracking purposes.

5. Click Browse in the Upload Spreadsheet window.

   An upload dialog box opens.

6. Select the spreadsheet you saved in step 4.

7. Do one of the following:

   • If you are doing a test import of your data in TRAIN, select the Continue till the end option.

     This will import the entire spreadsheet, with the exception of the lines that have errors. The system will give you a summary of the lines that had errors once the import is complete.

   • If you are importing your data in PRODUCTION, select the On first error option.

     This will stop the import if the system encounters an error, and the system will inform you which line had the error. You can then fix your import, remove the lines that have already been imported, and then re-import the spreadsheet.

8. Click Import.

   The import starts.

   The import completes. A window with a summary of the results of your import displays.

9. Click Close.

   The window closes. A dialog box opens, asking if you want to reload the page.

10. Click Yes.

    The page refreshes. Your new data appears on the page.

To generate a GASB 87 accounting schedule:

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

   The Create New GASB 87 Rent Schedule window opens. The Begin Date, End Date, and Discount Rate automatically populate. Many of the fields will automatically populate with data entered on the GASB 87 Contract Accounting Assumptions page. This is the last place where you can edit these fields prior to generating your schedule.

   To learn how to select a different discount rate from the Manage Discount Rates table, see our Search for Another Discount Rate article.

   Note:

   The default value of the Schedule Begin Date is the later of the Accounting Begin Date or the first day of the first unposted period for the schedule. You can override the value of the Schedule Begin Date in the Create Schedule window, provided the date you choose is on or after the first day of the first unposted period.

2. Select the schedule type from the Type field.

3. Select the reason for creating the schedule from the Creation Reason field.

   Creation reasons are either user-generated or generated at the company level. However, all creation reasons created at the user level will also be available at the company level.

4. If you want to specify a percentage or amount of the total asset balance that should remain after the schedule end date, enter the value in the Remaining Asset Balance field.

   There are two option buttons: Currency and Percentage. If you enter a value between 0-100, the system will default the option setting to Percentage. If you enter a value of 100.01 or above, the system will default the option setting to Currency. You can override the default option setting.

5. If you want to select a date beyond the schedule end date to amortize to, enter the date in the Date to Amortize to field.

   By default, the value of this field is the schedule end date.

   To learn more about asset amortization, see the Amortization of the Asset in Contracts article.

6. Enter any incentives that have reduced the cost of the lease in the Lease Incentive Amount field.

7. Enter any other miscellaneous costs that should be accounted for in the schedule in the PV Of Other Adjustments field.

8. Enter the amount paid towards rent prior to the commencement date, minus any incentives that have reduced the cost of the lease, in the Payments Before Commencement (Less Incentives) field.

9. Enter the incremental costs of a lease that would not have been incurred if the lease had not been obtained in the Initial Direct Costs field.

   For example, broker’s fees, certain legal fees, and certain payments to tenants to move out.

10. Enter the cost of any activity necessary to restore the asset to its original state prior to the expiration of the lease in the Dismantling / Restoring Costs field.

11. Enter any deductions related to the diminished value of the asset in the Impairments field.

    Important!

    Impairments should be entered as a negative value.

    If you enter a value in the Impairments field, two read-only fields appear:

    • Prior Accumulated Amortization Balance: Accumulated Amortization Balance of the accounting period prior to the impairment.

    • Total: Sum of the impairment and the Prior Accumulated Amortization Balance.

12. Click Create Schedule.

    The page refreshes, and the schedule appears on the page.

Re-measurement is the process by which an entity will adjust the right of use asset and lease liability due to a change. Generally, re-measurement occurs if something has changed in the contract. Maybe the termination option was renegotiated, or maybe additional costs came up that needed to be added to the contract.

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.

To re-measure a lease accounting schedule:

1. Click Calculate Schedule.

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

   A window relevant to the schedule you are re-measuring opens.

2. Enter the dates that your re-measurement should begin and end in the Begin Date and End Date fields.

   You can also click Calendar to open the Date Picker and select the appropriate date.

   Note:

   The default value of the Schedule Begin Date is the later of the Accounting Begin Date or the first day of the first unposted period for the schedule. You can override the value of the Schedule Begin Date in the Create Schedule window, provided the date you choose is on or after the first day of the first unposted period.

3. Select the schedule type from the Type field.

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

   Creation reasons are either user-generated or generated at the company level. However, all creation reasons created at the user level will also be available at the company level.

5. Select the lease type from the Lease Type field.

   The data from the existing schedule populates. If there are any posted periods between the Begin Date and the End Date, the Re-measurement Balance Forward will automatically calculate the re-measurement balance forward for those posted periods.

6. Make any changes necessary to the discount rate, the liability values, and the right of use asset values prior to re-measurement.

   To learn how to select a different discount rate from the Manage Discount Rates table, see our Search for Another Discount Rate article.

7. Click Create Schedule.

   The window closes, and the page refreshes. The re-measured schedule appears in your GASB 87 Rent Schedule List on the GASB 87 Rent Schedule page.

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.

Partial Lease Termination

Full Lease Termination

Important Note About Full Lease Termination