NetLease Accounting Decisions & Account Usage

Prior to the installation and configuration of NetLease, 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
- Present Value Calculation Decisions (Payment In Advance, In Arrears, or Precision)
  - The lease liability present value within NetLease can be set to calculate based on both in-advance payments (beginning of month), in-arrear payments (end of month), or precision (for payments made at irregular intervals. This setting allows for more flexibility and detail in the payment calculations).
  - Note that in-advance or in-arrears payments can be set separately for each lease type as well as on the underlying lease. For example, Real Estate lease payments are frequently due at the beginning of the month (in advance) while equipment leases are paid at the end of the month (in arrears)
Chart of Accounts Decisions
- Note that NetLease 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 NETLEASE SYSTEM ACCOUNTS RECOMMENDED

Netgain strongly recommends that the key lease accounts listed below are set up as single-purpose accounts (i.e., for NetLease 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 NetLease (as the subledger) and the general ledger.

NETLEASE STANDARD ACCOUNT USAGE

NetLease setup utilizes the following accounts:

Account	Account Type	Description	Example Account #
Account Mapping: All Lease Types
ROU Asset	Other Asset	Long-term asset account where Right of Use Asset will be recorded for each lease	1600
ROU Accumulated Amortization	Other Asset	Contra-account to Right of Use Asset that records reductions to ROU asset. This should be set up as a subaccount of ROU Asset	1601
ROU Clearing	Other Current Asset	Current Asset clearing account to record initial direct costs, prepayments, and incentives prior to commencement, as well as amounts receivable upon the termination of a lease. ROU clearing reconciliations review activity between vendor bill payments and lease payment schedules running through this account	1200
Lease Payable Clearing Account	Other Current Liability	A child of the Lease Liability (Short-Term) account. This account is where lease vendor bills and monthly payments from the subledger amortization entries are recorded. Lease Payable Clearing reconciliations review activity between vendor bill payments and lease payment schedules running through this account	2110
Lease Liability (Short-Term)	Other Current Liability	The Short-Term lease liability account. Amounts in this account are populated through a monthly auto-reversing reclass journal entry	2150
Deferred Rent	Other Current Liability	Deferred rent account for Short-Term Leases (or Low-Value leases under IFRS) to record to deferred rent any differences between the monthly single expense over the entire lease period and the monthly payment for that month	2120
Lease Liability (Long-Term)	Long-Term Liability	Long-Term liability account. This is the PRIMARY lease account where all lease activity on the lease record is recorded	2600
Lease Liability Contra (ST Reclass)	Long-Term Liability	Child account of Lease Liability (Long-Term). The monthly ST/LT reclass entry pulls amounts from this account to record into the current section of the balance sheet	2610
Go-Live/Transition Entry Equity Account	Equity	Equity account where net balances of transition journal entries are to be recorded. These amounts can be recorded directly to Retained Earnings unless a separate account is preferred	3030
ROU Impairment Charge Account	Other Expense	The loss account where impairment charges for ROU impairments are to be recorded	8050
Loss (Gain) on Lease Termination	Other Expense	The gain/loss account where the net impacts of lease changes are recorded, including from full or partial terminations (scope reductions)	8045
Account Mapping: Operating (US GAAP & Short-Term/Low-Value)
Lease Expense Account (Operating)	Expense	The expense account that operating leases will book to as a single expense Note this is applicable for US GAAP ONLY	6200
Deferred Rent	Other Current Liability	Deferred rent account for Short-Term Leases (or Low-Value leases under IFRS) to record to deferred rent any differences between the monthly single expense over the entire lease period and the monthly payment for that month	2120
Account Mapping: Financing Leases (All Accounting Standards)
ROU Amortization Expense	Expense	Amortization Account where periodic amortization of the ROU asset will be recorded Note this is for all IFRS leases and only Financing leases for US GAAP	6065
Interest Expense	Expense	Expense account to record interest charges for lease liability accretion Note this is for all IFRS leases and only Financing leases for US GAAP	6110
Account Mapping: Operating (Sublease Accounts)
Sublease Income Account	Income (Revenue)	Revenue account where sublease revenue is recorded	4001
Sublease Accrued Rent Receivable/Deposit Liability	Other Current Asset/Liability	Account to capture any differences between sublease income on a straight-line basis and expected payments/billings	1510

Chart of Account Updates:

To update your NetSuite chart of accounts, navigate to Setup > Accounting > Chart of Accounts

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