If you revise the lease, in most cases it needs to be tested for finance vs. operating both from the lease inception date (FAS 13/IAS 17 only) and separately as of the revision date. Therefore, you must enter the incremental borrowing rate, implicit rate (if known; this is calculated automatically if the unguaranteed residual is filled in), unguaranteed residual (if known), economic life, and fair value to enable testing. The Revision Booking Date is the date as of which the revision should be entered onto the books. EZLease automatically determines the First Date of Change, which is the date as of which the first change in terms takes effect. This set of fields is not available when first entering a new lease.
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Field |
Definition/Format |
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Underlying Asset Scope |
If a lease is revised, the change may reflect a change in the underlying asset. For instance, the square feet leased in a building may change (becoming larger or smaller). If the scope increases, and the increased rent is commensurate with the standalone price for the additional right of use, the increase is treated as a new agreement. [842-10-25-8] If the scope increases, and the increased rent is not commensurate with the standalone price, the lease must be broken into two components reflecting the original asset and the new asset, with the rent allocated proportionally to each. [842-1025-11, 842-10-55-168] If the scope decreases, the asset is reduced proportionately, and a gain or loss recognized for the difference between the change in asset and change in liability. [842-10-25-13, 842-10-55-177] You can enter a percentage by which the asset is reduced in the Reduced Asset Percentage (optional according to 842-10-55-183, required for IFRS 16). Otherwise, EZLease calculates the percentage to reduce the Right-of-Use asset based on the percentage change in lease liability, as described in 842-10-55-181. |
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Reduced Asset Percentage |
If you select that the Underlying asset scope has decreased, you can enter the remaining percentage of the original asset. Entering a percentage is optional for ASC 842, required for IFRS 16. If entered, this percentage will be used to calculate the amount of reduction in the right of use asset and accumulated depreciation. If not entered, the percentage is calculated based on the remaining liability after revision compared to the liability before revision. |
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Revised Fair Value as of Inception |
Usually the fair value entered in the revision box is the fair value as of the revision date. However, sometimes it is desirable to restate the fair value at inception, to cause the lease to be recalculated (particularly the implicit rate) using the corrected value. Check this box to cause it to be so treated. |