Real Property / Leases / Lease Portfolio / Extension for Lease Accounting

To Record and Classify a Gross Lease

In a gross lease, the lease may specify that the leasee pay not only the cost of renting an asset but also for non-lease components such as property taxes, insurance, repair costs, and maintenance costs.

According to FASB 842 rules, non-lease components can be expensed, while the lease rent and options must be calculated .

Organizations are permitted to use observable stand-alone prices to estimate the cost of non-lease components. If prices are not available, organizations are permitted to estimate the stand-alone price for non-lease components.

Procedure

Enter the lease using the Portfolio Edit Wizard or the Lease Portfolio Console. Both are available on the Navigator at Real Property / Leases / Lease Portfolio.

1. Enter lease costs using the RENT- BASE RENT Cost Category. These costs will be included in the FASB 842 calculations.
2. Enter non-lease costs using other Cost Categories (such as MAINT - SECURITY, TAX - PROPERTY TAX, and INSURANCE). Assign these costs to the lease. These costs will be included in any invoice costs for the lease (as they are assigned to the lease); however, they will not be included in the FASB calculations (as they are not base rent).

Outcome

With this approach:

• the cost tables will include both lease and non-lease components
• the Lease Classification Wizard will include the RENT - BASE RENT costs in the right-of-use asset and lease liability calculations, but will not include the other costs.