Leases are often renewed or extended. Meaning, the same asset is leased for an additional period of time. The best way to handle entry of the extension varies depending on the circumstances:
Renewal option is exercised that was previously entered on the EZLease record (not previously marked as Recognized)
| Step |
Action |
| 1 | Click Edit Lease and go to Terms/Options tab |
| 2 | Check Recognized for the renewal(s) being exercised. |
| 3 | Save Lease and select Revise. The Revision Booking Date will be the date the option was exercised. Set the revision Incremental Borrowing Rate to the rate as of the Revision Booking Date. |
If the lease is Finance or ASC 842 Operating, the asset and liability are adjusted at that date by the increase in the present value of the remaining rent.
If the lease is a lessor operating lease (or FAS 13/IAS 17 operating), any rent leveling is extended over the remaining life of the lease.
Renewal option is exercised that was previously entered on the EZLease record (already marked as Recognized)
| Step | Action |
| 1 | No change is necessary |
If you wish, you can check the Contract box for the renewal option, which is used only for optional reporting of future rent commitments, according to whether the contract has been signed rather than according to whether the option is reasonably certain to be exercised (This is a non-GAAP reporting option for the Future Rent Commitments report only.).
Renewal option not previously entered; no change in the terms of the lease for the remainder of the existing life, done near the end of the original lease
You may choose whether to renew/extend the existing lease, or to create a new lease for the renewal period:
Option 1 - Extend existing lease
| Step |
Action |
| 1 | Click Edit Lease and go to Terms/Options tab. |
| 2 | Add the renewal option and mark as Recognized. |
| 3 | Enter the rent for the renewal term on the Main Data tab. |
| 4 | Save Lease and select Revise. The Revision Booking Date will be the date the option was exercised. Set the revision Incremental Borrowing Rate to the rate as of the Revision Booking Date. |
Option 2 - Create new lease for renewal period.
| Step | Action |
| 1 | Create a new lease for the renewal period (See: Adding leases) |
Note: Once a lease is expired, it is taken off the books and cannot be updated. So, if you need to extend a lease that has already expired, you MUST recognize the renewal option in prior periods (by using a revision booking date of the last day of the original lease term, or earlier); otherwise; the renewal term MUST be set up as a brand new lease.
Renewal option not previously entered; terms of existing lease change, or extended time remaining until expiration
| Step | Action |
| 1 | Click Edit Lease and go to Terms/Options tab |
| 2 | Add the renewal option and immediately mark as Recognized |
| 3 | Enter the rent for the renewal term on the Main Data tab. |
| 4 | Save Lease and select Revise. The Revision Booking Date will be the last day of the original lease term. |
Note: Once a lease is expired, it is taken off the books and cannot be updated. So, if you need to extend a lease that has already expired, you MUST recognize the renewal option in prior periods (by using a revision booking date of the last day of the original lease term, or earlier); otherwise; the renewal term MUST be set up as a brand new lease.
Related links:
Revision (Modification) | Revise vs Replace | Lease modifications | Revision values & notes