NetLease - Standard Lease Modification

Use Case: The standard lease modification is the most common modification type, which can arise from a simple lease renewal. In those instances, you must remeasure the lease liability with the modification being recorded against the ROU asset (no P&L impact).

Prerequisites: Lease modifications must be entered in NetLease within the month and prior to month-end amortization and reclass entries. Additionally, 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, lease payments, non-lease payments etc.

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 the lease record where the modification is to be recorded and select the Modify Lease button by going to NetLease > Lease Management > Lease List and then select view on the lease that is being modified
After selecting Modify, you can see that the Modification Type will default to Standard Modification (LL Remeasure)

Note that the fields are prepopulated with the current lease attributes, including the payment schedule

Effective Date Field
The modification effective date is not a choice. It is the first open period on the lease's schedule without a journal entry posted. It is not available for override. It is auto-populated by NetLease. For example, if you ran journals through July, the modification effective date will be August.

If you wish to run a modification effective in a future period, you will need to run journals up to that point in time.
To run a modification as of a prior date, you will need to do a True Up Modification.

In the case where a lease is already Pending Close Out, the modification Effective Date will be the start date of the first NetSuite period after the end of the Lease. Do verify this date, navigate to Setup > Accounting > Manage Accounting Periods.

Update the following as necessary for the lease modification (refer to the guidance for appropriate adjustments per your modification type)

Field	Description	Example
Remaining Lease Term/Lease Term	Adjust the remaining or total lease term for any extensions or reductions in the lease term	10 or 24
Lease End Date	Adjust to the updated lease end date for any extensions or reductions in the lease term	12/31/2023
Discount Rate	Update the incremental borrowing rate to present value the lease liability going forward	5.0%
Modification Note	Provide a brief description of the basis and adjustments made with the modification for subsequent support and reference	Exercised option for 1 year extension
Next Uplift Date	Adjust the date in which any payment uplifts will occur	5/31/2023
Uplift Frequency	Adjust the frequency in which a payment uplift will occur	Monthly
Uplift Percentage	Adjust the uplift percentage for the modified payment increase	6.0%
Adjusted Payment Schedule	Update the payment schedule for any changes to the expected lease payments causing the modification	6,000

After double-checking updates and inputs for the modification and remeasurement, click Modify 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

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