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Leases you take, under IFRS 16, Ind AS 116 and ASC 842

For the offices, shops, vehicles and equipment your Entity rents from others. The lease liability, the right-of-use asset and a monthly schedule of interest and depreciation are worked out and posted to your books. Changes, early ends and the maturity analysis are included.

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Why it matters

A landlord group or retailer that rents offices, shops or vans. It must show those leases in its own books under IFRS 16, Ind AS 116 or ASC 842. The working usually sits in a spreadsheet beside the accounts. Here each lease you take is kept in the same system. The present value, the right-of-use asset and a month-by-month schedule are worked out when you press Start. Interest, depreciation and the lessor's bills post by themselves each month. A rent change or an early end is measured again from the month you choose. The maturity analysis for your notes is always up to date.

The problem it solves

Your auditor asks for the IFRS 16 or Ind AS 116 working, and it lives in one person's spreadsheet.
Every rent increase or extension means redoing the present value by hand and guessing the adjustment entry.
Interest and depreciation entries are posted once a year, so the monthly accounts are wrong.
The notes to the accounts need the payments due within a year and after five years, and nobody has them by lease.

How it works

Once, under Lease > Configuration > Settings, Leases We Rent: the standard (IFRS 16 / Ind AS 116, or ASC 842), the low-value limit. Then set the journal and the accounts.
Open Lease > Billing > Deposits and Owners > Leases We Rent > New (also under Invoicing > Accounting). Enter what is leased, the lessor, the asset class and the dates. Then the payment, how often, in advance or in arrears, a yearly increase, rent-free months and the discount rate.
On the other tabs, set the exemption (on the balance sheet, short-term or low-value) and the ASC 842 class. Add the costs and options, such as initial direct costs, incentives, restoration, or an extension or purchase that is reasonably certain.
Press Start. The liability is the present value of the payments, and the right-of-use asset is built from it. The opening entry is posted, and the Schedule tab shows every month.
A daily job posts each month's interest and depreciation and makes the lessor's bill when a payment falls due.
When the terms change, press Change the Lease: new payments, a new end date, more or less space, or end early. Apply measures the lease again from that month and posts the adjustment.

Everything it does

The lease

Numbered OCL/year/; what is leased, lessor, asset class (Property, Vehicle, Equipment, Other), location
Starts and Ends; the term in months is worked out, plus any extension reasonably certain
Payment Monthly, Quarterly, Half-yearly or Yearly; In Advance (the default) or In Arrears
Yearly Increase (%), Rent-free Months at the Start, Discount Rate a Year (%): the rate in the lease or your incremental borrowing rate
Initial direct costs, incentives received, paid before the start, deposit paid, restoration cost
Purchase option reasonably certain, with the asset's useful life for depreciation
States Draft, Running, Ended, Cancelled; only a draft can be cancelled

Accounting

Liability at start: the present value of the payments at the monthly rate
Right-of-use asset: liability plus initial direct costs and prepaid payments, less incentives, plus restoration
Opening entry: right-of-use asset against the liability, the restoration provision and the costs clearing account
Monthly entry: interest to the liability, depreciation of the right-of-use asset, on the month end
Depreciation over the term, or over the useful life when buying at the end is reasonably certain
ASC 842 operating lease: one straight-line lease cost a month; finance lease as IFRS 16
Short-term and low-value leases: kept off the balance sheet; each payment's bill goes to the lease expense account
Lessor bills are made as drafts on the payment dates, with no tax, for your accountant to check

Changes

New Payments, New End Date, More or Less Space (as a new payment), End Early
From the first day of a month not yet posted; a new discount rate if you give one
The schedule from that month is made again. The entry adjusts the liability and the right-of-use asset, and a gain if the asset would go below zero
End Early takes the liability and the asset off with the gain or loss
The Changes tab keeps each change: liability before and after, right-of-use adjustment, gain or loss, the entry

Balances and disclosure

Lease liability now, split into current and non-current; right-of-use asset (net)
Maturity: payments within a year, in 1 to 5 years and after 5 years, from the payments not yet billed

With the asset register

The right-of-use asset is put in the register as Right-of-use: what is leased, in the category Right-of-use Assets (made for you)
Its depreciation stays with the lease, so it is never depreciated twice; the register shows its cost and book value

Who uses it

Accountant (accounting Administrator)Sets the standard and accounts, adds leases, starts them, applies changes and checks the lessor bills.

Finance headReads the liability, right-of-use balances and the maturity analysis for the notes to the accounts.

Auditor (read-only accounting role)Opens each lease, its schedule, its changes and its entries.

Where you use it

Web: Lease > Billing > Deposits and Owners > Leases We Rent, and the same list under Invoicing > Accounting
Web: Lease > Configuration > Settings, Leases We Rent
Not in the apps or on any portal: this is for your accountants

What you control

Settings

Lease Accounting Standard: IFRS 16 / Ind AS 116 to start with, or ASC 842 (US)
Low-value Limit, Lease Entries Journal
Accounts: right-of-use asset, right-of-use depreciation, lease liability, interest expense, depreciation expense, lease expense of exempt leases, restoration provision, costs clearing, gain or loss on leases
Per lease: exemption (On the Balance Sheet to start with), ASC 842 class (Finance to start with), payment timing (In Advance to start with)

Questions

Which standards does it follow?

IFRS 16 and Ind AS 116, which work the same way here, and ASC 842 for US entities with its finance and operating classes. The standard is set per Entity.

Can short-term and low-value leases stay off the balance sheet?

Yes. Mark the lease Short-term (12 months or less) or Low-value Asset. Its payments are billed to the lease expense account and nothing goes to the liability.

What happens when the rent goes up mid-lease?

Use Change the Lease, New Payments, from the first day of a month not yet posted. The lease is measured again, the schedule redone and the adjustment posted.

Does it pay the lessor?

It makes the lessor's bill as a draft on each payment date. Your accountant checks it and pays it as usual.

Can it take the leases we already have?

Yes. Enter each with its real start date and discount rate. The schedule starts from the start date, so the daily job posts the months already past and makes draft bills for past payments. Agree the start with your accountant first.

Do we need the fixed asset register?

No. With the register in use, the right-of-use asset also shows there, with its depreciation kept by the lease.

Related features

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See your buildings on it.

Tell us how many properties and units you have, whether you let your own or manage for owners, and how rent is paid today. We will set up your portfolio with you on SmartMy Lease.

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