Set up lease posting accounts

This article lists the posting accounts that are required for Asset leasing transactions and explains how to define posting accounts on the Lease posting parameters page.

To comply with Accounting Standards Codification Topic 842 (ASC 842) and International Financial Reporting Standard 16 (IFRS 16), you might have to create accounts in your chart of accounts. However, any accounts that you create to comply with ASC and IFRS standards aren't fixed asset accounts. Under ASC 842, a right-of-use (ROU) asset is recorded for both finance and operating leases. These leases are separate from fixed assets. (You can still maintain an ROU asset by using Fixed assets.)

For information about how to create account structures, see Create account structures. For information about how to create a main account, see Create a main account.

The following table shows examples of accounts that you must create for leased asset transactions, if they haven't already been created. Under IFRS 16, the operating lease relationships are still used for low-value and short-term leases.

Ledger account number	Account type	Account name
180150	Asset	Vehicle ROU asset
180160	Asset	Building ROU asset
180250	Asset	Accumulated depreciation - vehicles
180260	Asset	Accumulated depreciation - buildings
222300	Liability	Short-term obligation - finance leases
222310	Balance sheet	Short-term obligation - Operating leases
250200	Liability	Notes payable
250601	Balance sheet	Long-term obligation - finance leases
250602	Balance sheet	Long-term obligation - operating leases
250606	Balance sheet	Deferred rent
300160	Balance sheet	Retained earnings
604500	Expense	Lease Expense
604501	Expense	Vehicle operating lease expense - interest accretion
604502	Expense	Vehicle operating lease expense - amortization
605200	Expense	Building operating lease expense - interest accretion
605201	Expense	Building operating lease expense - amortization
607101	Expense	Vehicle lease amortization expense
607102	Expense	Building lease amortization expense
607103	Expense	Impairment expense - finance leases
607104	Expense	Impairment expense - Operating leases
618910	Expense	Lease expense - finance leases
618920	Expense	Variable payments - finance leases
618930	Expense	Variable payments - operating leases
800600	Expense	Vehicle lease interest expense
800601	Expense	Building lease interest expense
801201	Balance sheet	Gain & loss - lease modification

Configure posting accounts

To assign accounts to the lease books and groups that have been created, you must configure parameters for Asset leasing.

1. Go to Asset leasing > Setup > Lease posting parameters.

2. On the Accounts tab, open the Lease accounts FastTab. Determine the main accounts for finance and operation leases to corresponding Posting type. The preceding table shows the accounts that are related to operating and finance leases.

   Note

   This step requires that you set up separate accounts for both operating and finance leases for each posting type except Lease expense offset and Lease increase/decrease. Companies that adhere to the IFRS 16 accounting framework must add a main account for operating lease. But the system will not use this account even though it's a required field because all leases under IFRS 16 are classified as finance leases.

   Note

   Lease increase/decrease will be used as posting type for additional asset considerations, including Initial direct cost, Lease incentives, Lease prepayments and Dismantling costs, but post to the Right-of-use asset main account which defaults to Lease asset.

3. To select a specific lease group corresponding to main account, in the Account Code field, select Group. Then, in the Account/Group number field, select the lease group to assign to the main account.

4. To assign account codes to the administrative costs that have been set up in the system, on the Executory costs FastTab, in the Expense type field, select an expense. Then assign the finance and operating accounts to use for each book.

   Note

   The selected finance or operating account will be debited when the invoice for the scheduled expense is posted. Lease expense offset will be used as posting type for executory costs transactions but post to defined Offset account in the Execuroty costs payment schedule lines in lease details or lease book form.