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Please Note that Modifications are not included in the free version.
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 adjustments being recorded against the ROU asset (no P&L impact).
Prerequisites: Because a lease modification cannot be undone without significant effort, 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, and payment schedule.
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:
1. Navigate to the lease record where the modification is to be recorded and select the Lease Action drop down then choose Modify Lease.
2. On the Lease Modification page, the Modification Type will default to Standard Modification (LL Remeasure).
3. Note that the fields are prepopulated with the current lease attributes, including the payment schedule. Note that you are only able to modify fields such as Effective Modification Date, Lease Term, Lease End Date, Incremental Borrowing Rate, Notes, and Adjust Payment Schedule.
4. Update the following fields as necessary for the lease modification (refer to the guidance for appropriate adjustments per your modification type)
Field | Description | Example |
Effective Modification Date | Defaults to the first day of the next period. You can change to the desired effective date by choosing the calendar icon and selecting the date. | Feb 1, 2022 |
Lease Term | Enter the new lease term. | 72 |
Lease End Date | Automatically updates based on the new least term entered. | Dec 31, 2027 |
Incremental Borrowing Rate | Update the incremental borrowing rate that should be used to calculate the present value of the lease liability going forward. | 5.0% |
Notes | Provide a brief description of the basis and adjustments made with the modification for subsequent support and reference. | Exercised option for 1 year extension |
Adjust Payment Schedule | Update the payment schedule for any changes to the expected lease payments. | 11,000 |
5. Once all the fields have been updated click Modify Lease.
6. You can view the completed lease modification at the bottom of the lease record under Modifications.
- A new option will appear in the Lease Action drop down menu to Reverse Last Modification.
If you need a different type of lease modification, please look at the following articles:
- Decrease In Scope (LL Remeasure & Gain/Loss)
- ROU Impairment