Set up lease posting accounts
This article lists the posting accounts that are required for Asset leasing transactions and explains how to define posting accounts on the Lease posting parameters page.
To comply with Accounting Standards Codification Topic 842 (ASC 842) and International Financial Reporting Standard 16 (IFRS 16), you might have to create accounts in your chart of accounts. However, any accounts that you create to comply with ASC and IFRS standards aren't fixed asset accounts. Under ASC 842, a right-of-use (ROU) asset is recorded for both finance and operating leases. These leases are separate from fixed assets. (You can still maintain an ROU asset by using Fixed assets.)
For information about how to create account structures, see Create account structures. For information about how to create a main account, see Create a main account.
The following table shows examples of accounts that you must create for leased asset transactions, if they haven't already been created. Under IFRS 16, the operating lease relationships are still used for low-value and short-term leases.
| Ledger account number | Account type | Account name |
|---|---|---|
| 180150 | Asset | Vehicle ROU asset |
| 180160 | Asset | Building ROU asset |
| 180250 | Asset | Accumulated depreciation - vehicles |
| 180260 | Asset | Accumulated depreciation - buildings |
| 222300 | Liability | Short-term obligation - finance leases |
| 222310 | Balance sheet | Short-term obligation - Operating leases |
| 250200 | Liability | Notes payable |
| 250601 | Balance sheet | Long-term obligation - finance leases |
| 250602 | Balance sheet | Long-term obligation - operating leases |
| 250606 | Balance sheet | Deferred rent |
| 300160 | Balance sheet | Retained earnings |
| 604500 | Expense | Lease Expense |
| 604501 | Expense | Vehicle operating lease expense - interest accretion |
| 604502 | Expense | Vehicle operating lease expense - amortization |
| 605200 | Expense | Building operating lease expense - interest accretion |
| 605201 | Expense | Building operating lease expense - amortization |
| 607101 | Expense | Vehicle lease amortization expense |
| 607102 | Expense | Building lease amortization expense |
| 607103 | Expense | Impairment expense - finance leases |
| 607104 | Expense | Impairment expense - Operating leases |
| 618910 | Expense | Lease expense - finance leases |
| 618920 | Expense | Variable payments - finance leases |
| 618930 | Expense | Variable payments - operating leases |
| 800600 | Expense | Vehicle lease interest expense |
| 800601 | Expense | Building lease interest expense |
| 801201 | Balance sheet | Gain & loss - lease modification |
Configure posting accounts
To assign accounts to the lease books and groups that have been created, you must configure parameters for Asset leasing.
Go to Asset leasing > Setup > Lease posting parameters.
On the Accounts tab, open the Lease accounts FastTab. Determine the main accounts for finance and operation leases to corresponding Posting type. The preceding table shows the accounts that are related to operating and finance leases.
Note
This step requires that you set up separate accounts for both operating and finance leases for each posting type except Lease expense offset and Lease increase/decrease. Companies that adhere to the IFRS 16 accounting framework must add a main account for operating lease. But the system will not use this account even though it's a required field because all leases under IFRS 16 are classified as finance leases.
Note
Lease increase/decrease will be used as posting type for additional asset considerations, including Initial direct cost, Lease incentives, Lease prepayments and Dismantling costs, but post to the Right-of-use asset main account which defaults to Lease asset.
To select a specific lease group corresponding to main account, in the Account Code field, select Group. Then, in the Account/Group number field, select the lease group to assign to the main account.
To assign account codes to the administrative costs that have been set up in the system, on the Executory costs FastTab, in the Expense type field, select an expense. Then assign the finance and operating accounts to use for each book.
Note
The selected finance or operating account will be debited when the invoice for the scheduled expense is posted. Lease expense offset will be used as posting type for executory costs transactions but post to defined Offset account in the Execuroty costs payment schedule lines in lease details or lease book form.