NetLessor - Accounting Decisions & Account Usage
Prior to the installation and configuration of NetSuite, there are several key accounting and configuration decisions management should make with the assistance of the technical accounting team, including the following:
- Leasing Landscape and Key Accounting Decisions
- Applicable Standards (ASC 842, IFRS 16, or GASB 87)
- New Lease Standard Transition Date
- Transition Method
- Practical Expedients to Adopt
- What lease types to use to segregate your lease portfolio
- Chart of Accounts Decisions
- Note that NetLessor will be set up to map each separate transaction type to an account in your chart of accounts
- The listing below should be reviewed to identify which accounts will be needed under the new standard
DEDICATED NETLESSOR SYSTEM ACCOUNTS RECOMMENDED Netgain strongly recommends that the key lease accounts listed below are set up as single-purpose accounts (i.e., for NetLessor system-generate lease transactions only). This allows for complete segregation of activities between lease and non-lease accounting transactions to improve reporting and reconciliations between NetLessor (as the subledger) and the general ledger. |
NETLESSOR STANDARD ACCOUNT USAGE
NetLessor setup utilizes the following accounts:
| All Lease Types | |||
|---|---|---|---|
| Account | Account Type | Description | Example Account # |
Lease Receivable Clearing Account | Other Current Asset | Asset Clearing account where all expected billings per the lease schedules are recorded against. The offsetting entries are recorded via a Native NetSuite invoicing | 1500 |
Inventory/Fixed Asset Clearing Account | Other Current Asset | Clearing Account where inventories assets are removed to place into fixed assets (operating) or Net Investment in Lease at lease commencement | 1290 |
Lease Capitalized Costs or Prepay Clearing Account | Other Current Asset/ Other Expense | Clearing Account to flow through initial capitalized Costs and Prepayments, which are cleared through lease initial balance entries | 1580 |
Gain/Loss on Lease Modifications Account | Other Expense | P&L account to capture gains or losses arising from lease modifications and early terminations | 8200 |
| Transition/Go-Live Entry Clearing Account | Other Current Asset/ Other Expense | Clearing Account for the offset when mid-lease beginning balances are established at go-live of the NetLease for Lessors solution (as prior month ending balance) | 1295 |
| Operating Lease | |||
| Account | Account Type | Description | Example Account # |
Lease Revenue Account | Revenue | Revenue account to record straight-line revenue from operating leases | 4100 |
Deferred Rent Receivable/ Deposit Liability Account | Other Current Assets | Account to capture any differences between lease rental revenue/income on a straight line basis and expected payments/billings | 1560 |
Capitalized Initial Direct Cost B/S Account | Other Asset | Asset account to capture the capitalized Initial Direct Costs to be amortized throughout the lease term | 1570 |
Amortization of Initial Direct Costs Expense Account | Expense | Expense account to recognize the straight-line expense amortization for initial direct costs that were capitalized and deferred throughout the lease term | 6090 |
| Sales Type & Direct Financing Lease | |||
Account | Account Type | Description | Example Account # |
Net Investment in Lease - PMTS & GUAR Residual Account | Other Asset | Primary Other Asset Account where Sales-Type and Direct Financing Leases are recorded. Note this is the primary account where activity is recorded throughout the lease lifecycle | 1850 |
Net Investment in Lease - Unguaranteed Residual Account | Other Asset | This is a custom field created for your account. | |
Interest Income Account | Revenue | Revenue account to record interest income from Sales-Type and Direct Financing Leases | 4110 |
Lease Selling Profit Account | Revenue | Revenue account to capture initial difference between fair market value and carrying cost on a sales-type lease | 4120 |
Lease Cost of Good Sold Account (Gross-up Only) | Expense | This is a custom field created for your account. Contact your administrator for details. | |
Chart of Account Updates:
- To updates to your NetSuite chart of accounts, navigate to Setup > Accounting > Chart of Accounts