NetLease - Lease Reporting And Disclosures

Overview

BACKGROUND AND USE CASE: NetLease was purpose-built to meet the reporting and disclosure requirements of ASC 842 and IFRS 16.

The following are a listing of the key Financial Statement Reporting Requirements and how NetLease supports each. Note that the initial account setup is important—especially when identifying where on the financials the lease accounting transactions should be reflected.

Requirement	Standard	How NetLease Supports
Statement of Financial Position Requirements:
Finance and Operating Lease ROU Assets must be presented separately (or disclosed)	ASC 842-20-45 IFRS 16:47	The accounts for ROU Assets and Lease Liability are assigned in initial setup All NetLease reporting natively segregates Finance and Operating Leases Users can additionally elect to assign separate GL accounts to each Lease Type
Finance and Operating Lease Liabilities must be presented separately (or disclosed)	ASC 842-20-45	All NetLease reporting natively segregates Finance and Operating Leases Users can additionally elect to assign separate GL accounts to each Lease Type
Statement of Comprehensive Income
A lessee must present both Finance Lease and Operating Lease expenses separately, and operating lease expense must be included in income from continuing operations	ASC 842-20-45	All NetLease reporting natively segregates Finance and Operating Leases Users assign GL accounts for each lease type and transaction category, and chart of account details and reporting hierarchies should be set for those accounts per the guidance
For Financing leases, Interest Expense on the Lease Liability and Amortization on the ROU Asset are not required to be presented as separate line items; presentation should be consistent with how they are handled for similar assets (same as previous capital lease treatment under the old standards)	ASC 842-20-45	Users assign GL accounts for each lease type and transaction category, and chart of account details and reporting hierarchies should be set for those accounts per the guidance NetLease also supports lease-specific reporting that segregates activity
	IFRS 16	Each lease expense is assigned an account separately as part of initial configuration NetLease also supports lease-specific reporting that segregates activity for lease activity only Users can elect to assign separate GL accounts for each lease activity and verify their reporting hierarchies aggregate the accounts per the guidance
Variable Lease Expense Payments for Finance Leases (not included in lease liability): Deloitte highlights that they would accept presentation of variable lease expense in the P&L as either (1) interest expense or (2) a component of income from continuing ops (e.g., lease expense)	ASU 2016-02 BC271 (ASC 842 is silent)	When vendor bills are input, the lease payment costs on the payment schedule are recorded against the lease payable clearing account, and any additional lease expense payments are coded as separate line items on the vendor bill A lease can be tagged as having additional variable lease expenses on the Payments subtab in the Key Payment Details section and include an indication of type, but those payments should NOT be included within the Lease Payments Schedule to calculate the lease liability and ROU Asset Additional expected expenses can be added and reported on within the Abstract Data subtab under the Expected Lease Costs sublist
A lessee’s lease cost should be evaluated and classified consistent to other similar types of expenses, whether in cost of sales, SG&A, or other operating expense line item		Users assign GL accounts for each lease type and transaction category, and chart of account details and reporting hierarchies should be set for those accounts per the guidance
Statement of Cash Flows—Finance Leases (All IFRS and US Financing Leases)
Operating Section—Non-cash expenses should be added back to net income	ASC 842-20-45	Direct Method: Not applicable Indirect Method: Amortization Expense GL detailed reporting by Lease
Operating Section—Interest on the Lease Liability for Finance Leases	ASC 842-20-45	Direct Method: Report of payments by lease Indirect Method: No action; interest expense embedded in net income
Operating Section—Variable lease payments and Short-Term lease payments not included in lease liability	ASC 842-20-45	Direct Method: Report to list payments by lease includes other line-level details Indirect Method: Embedded already in net income
Financing Section—Finance Repayments of the principal portion of the lease liability	ASC 842-20-45	Direct Method: Report to list payments by lease Indirect Method: Roll-forward report with all lease liability reductions by Finance lease type
Statement of Cash Flows—Operating Leases (US Operating Leases Only)
Operating Section—Payments on Operating Leases	ASC 842-20-45	Direct Method: Reporting listing payments by lease, segregated by type Indirect Method: Add-back of Non-cash Lease Expense via report of additions to accumulated Amortization account; for change in lease liabilities, all lease liabilities for operating leases are operating liabilities

The following are a listing of the key Disclosure Requirements (ASC 842-20-50) and how NetLease supports each. These requirements below were obtained by Deloitte’s Roadmap to Applying the New Leasing Standard

Requirement	How NetLease Supports
Information about the nature of an entity’s leases:
General description about the nature of an entity’s leases (including subleases)	General description report highlights lease breakout by type, classification, subsidiary, currency, ROU & LL balance, etc.
Basis and terms and conditions on which variable lease payments are determined	Variable lease terms disclosure report highlights leases tagged as variable rate with lease classification, rate index types, # of leases, and original NPV
Terms and conditions of options to extend or terminate leases	Lease Renewal Option Disclosure and Lease Termination Option Disclosure reports provide a listing of leases with options, details of the option, and whether it is likely to exercise
Residual Value Guarantees	Residual Value Guarantee report highlights leases with residual value guarantees indicated on the payments subtab with associated expense
Restrictions or covenants imposed by leases	Custom reports can be written to pull terms loaded to abstract data subtab
Leases that have not commenced	General description report, filtered by status
Significant assumptions and judgments
Whether a contract contains a lease	Assumption/Judgment—qualitative response needed
Allocation of consideration in a contract	Assumption/Judgment—qualitative response needed
Discount Rate
Amounts Recognized in the Financial Statements
Finance lease cost	Financial Reports
Operating lease cost	Financial Reports
Short Term lease cost	Financial Reports
Variable lease cost	Financial Reports
Sublease income	Financial Reports
Net gain or loss from sale-and-leaseback transactions	Financial Reports
Cash paid for amounts included in measurement of lease liabilities	Cash Flow Reports above
Supplemental noncash information	Financial Reports
Other Disclosure Information
Weighted-average remaining lease term	Disclosure reports
Weighted-average discount rate	Disclosure reports
Maturity analysis of liabilities	Disclosure reports
Lease Transactions with related parties	Disclosure reports
Practical-expedient disclosure related to Short-Term leases	Disclosure reports
Practical-expedient disclosure related to separating lease components	Disclosure reports
Electing transition practical expedients: Hindsight practical expedient Practical expedient package Not to restate comparative periods	Disclosure reports

Was this article helpful?