NetLease - Lease Modification Proposals
Prerequisites: Lease modifications must be entered in NetLease within the month and prior to month-end amortization and reclass entries. Additionally, because a lease modification cannot be undone without significant effort, before running a lease modification, it is best practice to review the lease entries and confirm the changes you intend to make to the term, discount rate, and payment schedule.
Effective Date: Note that the effective date is the date when both parties agree to the lease modifications. Therefore, the month in which the agreement is obtained is most likely the date that it should be recorded within NetLease.
Step By Step Process:
- Navigate to NetLease > Lease Management > Modification List and then select New NetLease Modification
- Select the lease for which the modification is proposed
- Once a lease is selected, the current lease attributes will prepopulate into both the old and new sections
- Select the correct modification type
- Keep Status as Pending Approval
- Update the following as necessary:
| Field | Description | Example |
| New Lease Term | Adjust to the updated lease term for any extensions or reductions in the lease term - adjusting this term will change the new remaining term and new lease end date | 24 |
| New Remaining Term | Adjust to the updated lease term for any extensions or reductions in the lease term - adjusting this term will change the new lease term and new lease end date | 10 |
| New Lease End Date | Adjust to the updated lease term for any extensions or reductions in the lease term - adjusting this term will change the new lease term and new remaining term | 12/31/2023 |
| New Incremental Borrowing Rate % | Update the incremental borrowing rate to present value the lease liability going forward | 5.0% |
| ROU Impairment Amount/Scope Decrease | Enter the applicable amount of ROU Impairment or Scope Decrease (if respective type is selected) | $50,000 |
| Notes | Provide a brief description of the basis and adjustments made with the modification for subsequent support and reference | Exercised option for 5 month extension |
- After double-checking updates and inputs for the modification and remeasurement, click Save
- You will be navigated back to the modification list and you will see the lease modification proposal with a status Pending Approval
- Once the lease has been reviewed, the status can be changed to either Approved or Rejected
- After this is complete, you can select view on the lease and click Modify Lease
- Alternatively, you can navigate to NetLease > Mass Update Leases > Mass Modify Leases to see all the leases that have approved modification proposals
- If you have selected a single lease, you will be navigated back to the lease record and you can refresh and monitor the Processing Modification… notification until the modification is complete and you can see the modification and subsequent adjustment to the go-forward schedule entries
- The Effective Modification Date Period will be split into two entries, one to record the GL Impact of the Modification and one to record the normally scheduled amortization
- Click on hyperlink to the NetLease Modification entry to see the adjustment to the lease liability and offset to the ROU Asset
- A historical record of the modification will be saved to the Modifications subtab of the NetLease Lease record with details from before and after the modification
- Clicking the Edit link will reveal the lease information both before and after the modification