1. What is an operating lease? 2. What is a capital lease / finance lease? 3. Capital/finance lease vs. operating lease criteria Transfer of title/ownership to the lessee Exercising a purchase option Lease term Present value Alternative use 4. Finance lease vs....
CONTENT BY
Rachel Reed, Team Lead, Technical Accounting Consultant
Deferred Rent under ASC 842 Explained with Examples and Journal Entries
1. What is deferred rent? 2. Deferred rent under ASC 842 3. Deferred rent example under ASC 842 with ROU assets and lease liabilities Deferred rent journal entries under ASC 842 for year 1 Deferred rent under ASC 840 vs. ASC 842 4. Treatment of deferred rent during...
The Art of Shrinking: Lease Adjustments in Real Estate Downsizing
Working from home began as a two week “temporary” experiment in March 2020 at the start of the COVID 19 pandemic. Over four years later, remote work has evolved into the new normal as companies and employees realize they can operate as efficiently, if not more...
SaaS Management Overview: Platforms, Operations, Spend & More Explained
1. What is SaaS Spend Management? 2. What is SaaS Operations Management? 3. What is SaaS License Management? 4. SaaS vs. managed services 5. What are SaaS management platforms (SMPs)? Which SaaS applications are being used? How are they being used? Who has access to...
Materiality, Immateriality, and Material Misstatements in Accounting Explained
What is materiality in accounting? Materiality is the accounting concept that the more significant missing or incorrect information is to an entity, the larger impact the error or omission may have on the decision-making of users of the affected financial statements....
CapEx vs. OpEx: Capital and Operating Expenses Explained
1. CapEx (Capital Expenditures) How is CapEx reported? 2. OpEx (Operating Expenses) How is OpEx reported? 3. Is software CapEx or OpEx? 4. CapEx vs OpEx: Which is better? 5. Summary 6. Related articlesEvery company has a variety of costs, from office leases to...
How to Replace Your Lease Accounting Solution
During many organizations’ initial implementation of the lease accounting standards, a software was selected to assist in crossing the finish line to compliance. If the selection of lease accounting software was frantic or last minute, you may not have had the...
How to Replace Excel as Your Lease Accounting Solution
For many accountants, when they hear “ASC 842”, “GASB 87”, or “lease accounting," they become anxious thinking back to a very stressful deadline-driven project with significant balance sheet implications. This might be because they implemented the new lease accounting...
What Is an Embedded Lease? How to Determine If You Have a Lease within a Contract
1. What is an embedded lease? A contract contains a lease when the following two criteria are met: 2. How to identify embedded leases Requirement 1: A specified asset is identified Requirement 2: Control of the identified asset is transferred to the lessee 3. How the...
Tenant Improvement Allowance Accounting under ASC 842 Explained with a Full Example
1. What is a tenant improvement allowance? 2. How tenant improvement allowances were accounted for under ASC 840 3. How to account for tenant improvement allowances under ASC 842 4. Tenant improvement allowances paid at or before commencement of the lease 5. Tenant...
How to Calculate the Present Value (PV) of Future Lease Payments in Excel
1. Present value of lease payments explained PV (Present Value) vs. NPV (Net Present Value) Minimum lease payments and future lease payments 2. How to calculate the present value of a payment stream using Excel in 5 steps Step 1: Create your table with headers Step 2:...
IFRS 16 vs. ASC 842 (US GAAP) Lease Accounting: What Are the Differences?
1. Transition approaches and application date 2. Scope 3. Lease classification for lessees 4. Variable payments based on an index or rate 5. Interest ratesThe international and United States lease accounting standards have been updated to provide further transparency...
Capital Lease Accounting and Finance Lease Accounting under ASC 842 Explained with a Full Example
1. What is a capital/finance lease? Finance lease vs. capital lease 2. Capital lease criteria under ASC 840 3. Finance lease criteria under ASC 842 "Strong-form" vs. "weak-form" finance leases 4. Finance lease accounting example Determining finance lease vs. operating...
Sale-Leaseback Transactions and Accounting under ASC 842 Explained
1. What is a sale-leaseback transaction? 2. Why enter into a sale-leaseback transaction? What are the benefits of a sale-leaseback transaction? What are the disadvantages of a sale-leaseback transaction? 3. Examples of sale leasebacks 4. Identifying a sale-leaseback...
SFFAS 54: FASAB Lease Accounting Explained with a Full Example
1. What is SFFAS 54? 2. Effective date 3. Lease definition What is a lease? Embedded leases 4. Scope Short-term lease exemption Lessee recognition Lessor recognition Discount rate 5. Example 6. SummaryWhat is SFFAS 54? SFFAS 54 is the new lease accounting standard...
Lease Payments: Establishing the Lease Liability/Asset & Receivable under GASB 87
1. Measurement Lessee's lease liability Lessor's lease receivable 2. Variable payments 3. Lease and nonlease components 4. Discount rate determination 5. Summary 6. Related articlesIn order to establish and maintain compliance with GASB 87, the new governmental lease...
GASB 96 Explained: Accounting for Subscription-Based IT Arrangements with Calculations and a Full Example
1. Scope SBITA defined Exemptions 2. Recognition and measurement of a SBITA Subscription liability Subscription asset Outlays other than subscription payments Disclosure requirements 3. SBITA example terms Initial implementation stage costs Operation and additional...
How to Conduct an Inventory of Your Leases under GASB 87
1. Scoping your leases 2. Definition of a lease 3. Exemptions Short-term leases Materiality Leases that transfer ownership Other GASB 87 exemptions 4. Finding your leases Look at your requisition process Engage the right departments Consolidate your leases in one...
How to Conduct an Inventory of Your Leases
1. Scoping your leases Leases defined Exemptions 2. Finding your leases Look at your requisition process Engage the right departments 3. Consolidate your leases in one place Cross-check your template for accuracy and completeness 4. Summary 5. Related articlesThere’s...
Lease Modifications and Remeasurements under ASC 842
1. Lease modification types Modification of existing lease vs. new lease Modification to terminate all or part of the lease Modification vs. reassessment 2. Summary 3. Related articlesA lease modification is a change to the terms and conditions of a contract resulting...
Asset Retirement Obligation (ARO) Accounting Example for Real Estate
An asset retirement obligation (ARO) represents the legal commitment to remove certain improvements or modifications to an asset at the end of the asset’s use. The FASB’s ASC 410 Asset Retirement and Environmental Obligations (ASC 410) discusses accounting for AROs....
Lease and Non-Lease Components under ASC 842: Electing the Practical Expedient
1. Identifying components Lease, nonlease, and noncomponents 2. Implications of the expedient Implications of not electing the expedient Implications of electing the expedient 3. Summary 4. Related articlesTo offer relief for the significant effort levels the...
Interest Rates under ASC 842 Explained: Implicit, Incremental Borrowing, Risk-Free
1. Interest rates under ASC 842 2. Implicit rate Application of the implicit rate 3. Incremental borrowing rate (IBR) Application of the incremental borrowing rate 4. Risk-free rate Expedient option Application of the risk-free-rate Proposed FASB amendment 5. Summary...
GASB 87 Disclosure Requirements for Lessees Explained with Examples
1. Qualitative disclosures 2. Quantitative disclosures Lease asset disclosure Lessee’s outflow of resources Lease liability disclosure and maturity analysis Future lease commitments Short-term leases: exempt Additional disclosures (if applicable) 3. Summary 4. Related...
Financial Statement Audits for Leases: Testing
1. Completeness and existence 2. Documentation of policies 3. Accuracy of calculations 4. Presentation 5. Summary 6. Related articlesThis is the third segment of an article targeted at private companies who have not yet adopted the lease accounting standard, as well...
Leasehold Improvements Accounting and Amortization under US GAAP
1. Common examples 2. Accounting for leasehold improvements Amortization of leasehold improvements Example of leasehold improvement amortization 3. Leasehold improvements and AROs 4. Bonus depreciation and tax considerations for qualified LHIs Qualified improvement...
Interest Rate Implicit in the Lease under IFRS 16 Explained
1. What is the implicit interest rate under IFRS 16? Implicit rate: ASC 842 vs. IFRS 16 2. Example: Calculate the interest rate implicit in a lease under IFRS 16 3. Summary 4. Related articlesWhat is the implicit interest rate under IFRS 16? The rate implicit in the...
Accounting for Rent Concessions under IFRS 16 as a Result of the COVID-19 Pandemic
1. Background 2. Changes to lease payments under COVID-19 3. IASB response 4. Accounting for COVID-19 lease concessions example 5. Accounting for lease concessions within the modification framework 6. Summary 7. Related articlesBackground The coronavirus pandemic...
Rent Concession Accounting under ASC 842 during COVID-19: Full Explanation and Example
1. COVID-19 Background 2. Changes to lease payments under COVID-19 3. Accounting for COVID-19 lease concessions Deferral of payments Payment reductions Summary 4. Accounting for lease concessions within the modification framework 5. Related articlesCOVID-19 Background...
Lease Liability Amortization Schedule: How to Calculate It in Excel
1. What is lease liability? 2. How to create the lease amortization schedule and calculate your lease liability Create five-column spreadsheet Enter the number of periods and cash payments Enter expense formula Fill expense column Enter liability reduction formula...