NetLease - Lease Terminations
Use Case: Circumstances may require an early termination to the lease. In these instances, a termination is required to remove the entire ROU Asset (and accumulated amortization), as well as any remaining lease liability, settling the final payments received, with an offset to the gain/loss account.
Step By Step Process:
- Navigate to the lease record to be terminated. An example lease record to be terminated is shown here
- Select Terminate Lease and confirm your intent to navigate to the lease termination page
- Update the fields as necessary for the Lease Termination
Field | Description | Example |
Effective Termination Date | Defaults to the first period without amortization recorded. To update to a later period, monthly journals will have to be run up to that point – please consider carefully before skipping ahead. If the default termination date on the screen is later than the desired termination date, deleting amortization entries for month of termination will be necessary. | 04/01/2019 |
Cash Paid to Terminate Lease | Input the amount to be paid in the lease termination month. Note that this amount should include both (1) standard lease payments, as well as (2) termination penalties or other consideration to be paid upon termination | 3,500 |
Cash Received to Terminate Lease
| Input the amount to be received from the termination. | 0 |
Termination Reason | Provide a brief description of the reason for the termination. | Early termination |
Termination Note | Provide any additional description or details for the termination | Excess supply and under-utilized; to return to lessor |
- After double-checking updates and inputs for the Lease Termination, click Terminate Lease
- The lease page will be refreshed with the Processing Status updated to read Processing Termination. Refresh the page periodically until the Processing Status is blank and the Status is Terminated
- Once the termination is complete and you’ll see the NetLease Termination transaction and removal of all subsequent amortization schedule lines
- Click on the hyperlink to the NetLease Termination
- Note that the journal entry reverses all cumulative balances in ROU Asset (Gross), Accumulated Amortization, Lease Liability (LT), and records the amount payable, with the offset to gain/loss on termination.
- Additionally, any Short-Term lease liabilities or interest payable amounts that were in the GL in the previous month will already have been eliminated due to auto-reversing status.
- Sublease terminations that include cash paid/received will result in Netlease booking a journal entry to book the gain/loss to the P&L upon termination. If the sublease has accrued rent at the termination date, Netlease will book a journal entry to remove the asset balance.