NetLessor - Standard Lease Modification
Use Case: The standard lease modification is the most common modification type that can arise from a simple lease renewal.
Prerequisites: Lease modifications must be entered in NetLessor within the month and prior to month-end amortization and reclass entries. Additionally, 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 NetLessor.
STEP BY STEP PROCESS
- Navigate to the lease record where the modification is to be recorded and select the Modify button. This will take you to the lease modification page
- Note that the fields are prepopulated with the current lease attributes, including the payment schedule
- Update the following as necessary for the lease modification
Field | Description | Example |
Modification Lease End Date | Adjust to the updated lease end date for any extensions or reductions in the lease term | 5/31/2033 |
Update Fair Value | Update fair value for the leased asset | 88,668.95 |
Updated Carrying Cost | Update the carrying cost of the leased asset | 88,668.95 |
Remaining Economic Life (Months) | Adjust to the updated remaining economic life of the leased asset in months | 180 |
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 |
| Updated Estimated Residual Value | Update the estimated residual value of the asset at the end of the lease agreement | 0 |
| Updated Guaranteed Residual Value - Lessee | Update the guaranteed residual value made by the lessee | 0 |
| Updated Guaranteed Residual Value - 3rd Party | Update the guaranteed residual value made by the 3rd party | 0 |
| Adjusted Payment Schedule | Update the payment schedule for any changes to the expected lease payments causing the modification | 0 |
- After double-checking updates and inputs for the modification and remeasurement, click Determine Lease Classification or Calculate Rates before submitting the lease modification (What is shown will be dependent upon the lease classification)
- After the lease has been classified with the updated information you are now ready to click Modify Lease to modify the lease
- You will be navigated back to the lease record and you can Refresh and monitor the Processing Status 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 show up as a single entry which will include both the monthly amortization and the modification
- Click on the Modifications subtab and click Edit next to your modification to see the adjustments before and after the modification
- A historical record of the modification will be saved to the Modifications subtab of the NetLessor Lease record with details from before and after the modification