NetLease Transition Methods and Go-Live Overview

Go-Live Summary

Our go live process is simple. (1) Load leases through CSV import tool or input lease data via user interface and generate the amortization schedules. (2) Kick off a system generated journal entry to establish the proper balances. (3) Reverse out your existing balance.

Pre-Requisites

Prior to go-live we need to have the following steps complete.

NetLease global settings complete
- See NetLease Global Settings for guidance
Lease types and account mappings finalized
- See Configure Lease Types & Mappings for guidance
Leases loaded and reviewed
- See NetLease Data Upload for guidance
- See NetLease Data Validation for guidance

Transition Method

Historical Transition Method

NetLease will generate amortization schedules from the beginning of each lease's original lease term.

Pros:

Retain reporting flexibility and a full history of the amortization schedule of each lease

Cons:

Lease modifications that have been made in the past must be performed individually by following the instructions in the Lease Modification Before Go-Live article

Possible transition adjustment if historical amortization amounts don't line up perfectly

Under this method the following rules apply to the lease upload:

Commencement date = Original commencement date of each lease contract

Lease Term (Months) = Full original lease term

Initial Payment Amount = Original payment amount in the first month of the lease term

Incremental Borrowing Rate = Original incremental borrowing rate for the lease

Lease Payment Schedule = Entire lease payment schedule from original lease commencement

Current Fiscal Year Transition Method

NetLease will consume existing accumulated amortization and generate schedule for lease liability and ROU asset balances on a go-forward basis.

Pros:

No transition adjustment necessary

No manual lease modifications prior to go-live

Cons:

No view of historical amortization amounts in NetLease subledger or reports

Under this method the following rules apply to the asset upload:

Commencement date = First day of the current fiscal year (note this can be a different date as desired, however, reporting will not be available for any periods prior to this date)

Lease Term (Months) = Remaining lease term from commencement date

Initial Payment Amount = Payment amount in the commencement month

Incremental Borrowing Rate = Incremental borrowing rate for the lease at commencement month

Lease Payment Schedule = Lease payment schedule from commencement month forward

ROU Adjustment = Difference between the lease liability and the net ROU asset as of the commencement date

ROU Asset Accumulated Balance at Commencement Date = ROU accumulated balance as of the commencement date

To implement using this method, there are two fields that will need to be shown on the lease record. To show these fields, either go to Customization > Lists, Records, & Fields > Record Types > NetLease Lease > Forms or go to create a new lease and at the top hover over “Customize” and select “Customize Form”.

On the form, go to the “Fields” subtab and the “Accounting” sublist. There will be two fields titled “ROU Adjustment” and "ROU Asset Accumulated Balance At Commencement Date”. Select the box to the right to “show” these fields on the lease record.

Rename the form and select "Save As".

Then navigate back to a new lease record.

The two new fields will be found under the “Accounting” subtab in the lease record.

If the lease has a difference between the ROU Asset and Lease Liability balances as of the commencement date, then put that net difference in the “ROU Adjustment” field. In the “ROU Asset Accumulated Balance at In-Service” field put the Accumulated Amortization balance as of the commencement date.

This will get the lease to the correct balances as of the Commencement date and going forward.

Transition Journal Entries

NetLease will book the following entries for each lease:

Debit: Gross ROU asset value
Credit: ROU accumulated amortization at go-live date
Credit: Lease liability
Debit/Credit: Go-live clearing account (This amount is a plug to get the entry to balance)

If the go-live period and the commencement date are the same month, the system will book an Initial Balance Entry instead of a Go-Live Entry. The difference in these entries is that the plug account will be the ROU Clearing account instead of the Go-live Clearing account.

Customer should book the following entry for each lease*:

Credit: Gross ROU asset value
Debit: ROU accumulated amortization at go-live date
Debit: Lease liability
Credit/Debit: Go-live clearing account (This amount is a plug to get the entry to balance)

*IMPORTANT:

the entry booked by the customer should be a native NetSuite journal entry, and not a NetLease-specific transaction
do not tag lease records to the manual reversing entry
the amounts in the manual reversing entry may not be an exact mirror of the NetLease Go-Live journal entry. Only the Go-Live Clearing Account will always be the same amount in both the Go-Live journal entry and manual reversing entry (see below for handling adjustments)
while a separate Go-Live journal entry will be created by NetLease for each lease, the manual reversing entry can be one combined journal entry

Together these entries net to zero (or small transition adjustment amount). If the historical transition method is used, the small transition adjustment should be written off as of the go live date.

See our Run Go-Live Journals article for more guidance.

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