The lease classification of your building and land components are independent of one another, and their classification may differ. If you do not know the lease classifications of your land and building components, you will need to run classification tests on both schedules. To learn how to run a classification test in Lucernex, see the ASC 842 Test page.
It is best practice to assign your secondary schedule to your land component.
Secondary Schedule Allocation Behavior
If there is more than one active schedule on an expense setup, the system will calculate the secondary schedule allocation in the following manner:
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If the allocation is being calculated as a percentage, the allocation is calculated as a percentage of the SUM of the two schedules.
For example, if there are two expense schedules for the expense setup which have monthly amounts of $6,000 (Expense Schedule A) and $2,000 (Expense Schedule B), the sum of the monthly amount for the two schedules would be $8,000. If the secondary schedule allocation was set to 25%, this would make the total allocation $2,000. This amount is deducted from the expense schedules proportionately, as described in the bullet below.
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Regardless of whether the allocation is a percentage or a fixed amount, the allocation is deducted from the schedules proportionately.
In the above scenario, Expense Schedule A consists of ¾ of the total expenses, and Expense Schedule B consists of ¼ of the total expenses. Therefore, $1,500 would be deducted from Expense Schedule A, and $500 would be deducted from Expense Schedule B.
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Partial first and last months are prorated.
For example, if the secondary schedule allocation is set to 20% and the partial month was 17/31 days, then the secondary schedule will receive 20% of the prorated partial month. If the secondary amount is set to $2000 with a total full-month payment of $10,000, and the partial month prorated payment is $5,483. 87 = (17/31) * ($10,000), then the secondary schedule would get an amount for partial month of ($2000/$10,000) * ($5,483.87) = $1096.77.
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If the allocation amount or percentage is changed, it will trigger the Recalc flag on the schedule.
Set Up Your Secondary Schedule Allocation
To add a secondary schedule allocation:
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Navigate to Contract > Payment Info > Recurring Expenses.
Use the links in the Navigation Pane on the leftmost side of the page.
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Do one of the following:
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Select the expense setup record you want to edit from the Contract Expense Setup List.
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Create a new expense setup record.
To create a new expense setup record, see the Add an Expense Setup procedures on the Recurring Expenses - Expense Setup page.
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Click the to the immediate right of the Expense Type field.
A window opens.
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Click Edit in the Actions column of the record.
To create a new expense type, follow the Add an Expense Type procedures.
The Edit Expense Type Code window opens.
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Click
to the immediate right of the Schedule of the type of schedule you want to add a land / building split to. The relevant fields are the Straight Line Schedule field, the ASC 842 Schedule field, and the IFRS 16 Schedule field.
A window opens.
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Click Edit in the Actions column of the record.
The relevant Edit Schedule Type window opens.
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Select the secondary schedule type from the Secondary Schedule Type field.
Important!It is best practice to assign your secondary schedule to your land component.
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Click Update.
The relevant Edit Schedule Type window closes.
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Click Update.
The Edit Expense Type Code window closes.
You return to the Recurring Expenses page.
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Do one of the following:
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Enter the percentage allocation for the secondary schedule in the Secondary Schedule Allocation in the Expense Setup section of the Recurring Expenses page, OR
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Enter the amount you want to allocate to a secondary schedule in the Secondary Rent Schedule Allocation Amount field.
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Click Save Changes.
This displays in the Actions menu on the right side of the page.
The page refreshes. Your changes are saved.
Note:If you have any covenants connected with this expense, you will also need to notate the secondary schedule allocation on the Covenants page.
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To add a secondary schedule allocation to a covenant:
Important!In order for a covenant to be included in your lease accounting schedule, you must also complete the following fields: Effective Date, Financial Amount, Accounting Adjustment Type, ASC 842 Schedule, IFRS 16 Schedule, and GASB 87 Schedule.
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Navigate to Contract > Abstract Info > Covenants.
Use the links in the Navigation Pane on the leftmost side of the page.
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Select the covenant you want to edit from the Contract Covenants List.
The covenant’s data populates on the page.
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Enter the allocation for the secondary schedule in the Secondary Schedule Allocation in the Abstract Information section of the Covenants page.
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Click Save Changes.
This displays in the Actions menu on the right side of the page.
The page refreshes. Your changes are saved.
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To add a secondary schedule allocation to an accounting assumption:
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Navigate to Contract > Accounting Info > Accounting Assumptions.
Use the links in the Navigation Pane on the leftmost side of the page.
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Click Edit.
This displays in the Actions menu on the right side of the page.
The page becomes editable.
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Click Edit in the Actions column of the record.
Select one of the following pages to learn how to add accounting assumption adjustments:
The Edit Accounting Assumption Adjustment window opens.
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Enter the allocation for the secondary schedule in the Secondary Schedule Allocation field.
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Click Update.
The window closes. The accounting assumption adjustment is updated.
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Next Steps
Once you have set up your land / building split:
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Run an ASC 842 Test on each of your schedules.
Note:Your schedules may have different lease classifications.
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Generate your lease accounting schedules.
You must generate two schedules, one for your land schedule and one for your building schedule.
