ASC 842/IFRS 16/GASB 87 only: Non-lease components are amounts included in the rent paid to the lessor which transfer to the lessee a good or service separate from the underlying leased asset. Examples include service contracts, common area maintenance in multitenant buildings, and consumable supplies. Reimbursement of payment of the lessor's costs, such as taxes and insurance (gross lease) do not qualify as non-lease components, because they do not transfer a good or service separate from the right to use the underlying asset. This differs from the definition of executory costs under FAS 13/IAS 17.
Applicable to ASC 842/IFRS 16 accounting: A payment to the lessor as part of the lease agreement which conveys a good or service separate from the underlying asset. Examples include a service agreement, common area maintenance, or copier supplies. Unlike FAS 13 executory costs, reimbursements of a lessor's costs, such as taxes and insurance, are not considered non-lease components and thus are part of the capitalized lease payments. This means that a gross lease (where the taxes and insurance are included in the specified rent) and a net lease (where taxes and insurance are billed separately) will have different liabilities.
A lease that begins before the ASC 842/IFRS 16 implementation date continues to report executory costs, not non-lease components, even after the transition, unless the lease is modified. If a lease is modified [revised], you'll update your rent schedule so that executory costs become non-lease components as of the revision booking date. A lease may not show both executory costs and non-lease components in the same fiscal period.
Up to five different types of non-lease components may be entered separately. You may choose how many types are displayed, and set titles for each type, in System Options, Text tab.