Standard Lease Modifications

Please Note that Modifications are not included in the NetLeaseGo free version.

Overview

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: Lease modifications must be entered in NetLeaseGo within the month and prior to month-end amortization and reclass entries. Since a lease modification cannot be undone without significant effort, 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 before running a lease modification.

Effective Date: 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 NetLeaseGo.


Process Steps

Step 1

  • Navigate to the lease record where the modification is to be recorded and select the Modify button


  • On the Lease Modification page, 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


Step 2:

  • Update the following 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 period without amortization recorded. To update to a later period, monthly journals will have to be run up to that point – please consider carefully before skipping ahead.

03/01/2020

Modified Lease End Date

Adjust to the updated lease end date for any extensions or reductions in the lease term

03/31/2021

Incremental Borrowing Rate

Update the incremental borrowing rate to present value the lease liability going forward

5.0%

Adjusted Payment Schedule

Update the payment schedule for any changes to the expected lease payments causing the modification

11,000

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

 

Step 3: 

  • After double-checking updates and inputs for the modification and re-measurement, click Modify Lease

Step 4:

  • You will be navigated back to the lease record where 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


  • A historical record of the modification will be saved to the Modifications subtab of the NetLeaseGo Lease record with details from before and after the modification



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