ASC 842 & IFRS 16
Under ASC 842/IFRS 16, the land is now capitalized as well as the building. Because finance and operating balance sheet values must be reported separately under ASC 842, and due to the complexity of recasting the operating portion of the lease while leaving the finance/capital portion unaffected, existing land and building leases (at least when the building is capital) must be split into two parts. Split Land and Building accomplishes this. For one or both of the resulting leases, specify a suffix that is automatically added to the lease number to distinguish the two leases. The leases are automatically linked.
If you wish to split the leases individually, display a lease and choose Split Land/Building Lease from the Lease menu. Again, the leases are automatically linked.
If you'd like to split all leases in your portfolio, go to File > New Standard Updates and complete the Split Land and Building Leases section, then click Process.
Note: It is not necessary to split land and building leases where the building is operating, but you may optionally split them.
Splitting is not needed for IFRS users using full retrospective application.
Under FAS 13, a lease that includes both a land and a building component gets special treatment if the value of the land is 25% or more of the total value of the leased asset. In that case (and unless there is an ownership transfer or reasonably certain purchase option), the land is treated as operating, and rent equal to the land's fair value times the incremental borrowing rate is set aside as the annual portion of the rent applied to the land. The rest of the rent is capitalized if the building is considered capital. (IAS 17 calls for similar treatment, but without the specific 25% threshold.)