What does each Account Configuration mean?

Below is a summary of what each Account Configuration means and when you should use it.

ROU Asset- This will be the account(s) where your Right of Use (ROU) Assets will reside. This is a Balance Sheet account and will be required for ALL customers regardless of lease portfolio.

Note- Although it is not required- customers sometimes prefer to create a few different ROU Asset accounts to differentiate between their types of leased assets (ex: ROU Asset- Building, ROU Asset- Vehicles, etc.)

Cash- This will be the account where your payments get applied. This will ultimately reduce your lease liability every month by the amount of the lease payment. This configuration is required for ALL customers regardless of lease portfolio.

Note- Most customers have an AP process where the cash payment is already applied outside of Occupier. Due to this there is a best practice that is normally used within Occupier. This best practice involves using a suspense/clearing account for the cash configuration in Occupier. During the AP application process your AP Coordinator would then Debit the same suspense/clearing account while Crediting Cash/AP. This will ensure that when Occupier's entries are posted at the end of the month that the suspense/clearing account clears to $0 and that your cash application process remains untouched.

Deferred Rent- This will be the account where your Deferred Rent is currently housed on your Balance Sheet, as at your transition date. This amount will be re-classified into the ROU Asset upon transition to ASC 842/IFRS 16.

Note- If your organization does not have any Deferred Rent then you can map any account to this configuration. This is where customers will sometimes create a "Not Applicable" account and map it to configurations that do not apply to their leasing portfolio.

Incentives- This will be the account where your Lease Incentives are currently housed on your Balance Sheet, as at your transition date. This amount will be re-classified into the ROU Asset upon transition to ASC 842/IFRS 16.

Note- If your organization does not have any Lease Incentives then you can map any account to this configuration. This is where customers will sometimes create a "Not Applicable" account and map it to configurations to do not apply to their leasing portfolio.

Initial Direct Costs- This will be the account where your Initial Direct Costs will be recorded (if any).

Note- If your organization does not have any Initial Direct Costs then you can map any account to this configuration. This is where customers will sometimes create a "Not Applicable" account and map it to configurations that do not apply to their leasing portfolio.

Prepaid Rent- This will be the account where Prepaid Rent will be re-classified into the ROU Asset (if any exists) at the time a lease is executed and/or transitioned to ASC 842/IFRS 16.

Note- If your organization does not have any Prepaid Rent then you can map any account to this configuration. This is where customers will sometimes create a "Not Applicable" account and map it to configurations that do not apply to their leasing portfolio.

Short-term Rent Expense- This is where an organization will code rent expense on short-term leases. This is normally differentiated from rent expense on long-term leases (leases within scope of ASC 842/IFRS 16) on the Statement of Profit and Loss.

Note- If your organization does not have any short-term leases then you can map any account to this configuration. This is where customers will sometimes create a "Not Applicable" account and map it to configurations that do not apply to their leasing portfolio.

Liability Accretion- This will be the account that increases the liability every month- similar to an interest component. It is recommended that customers configure the lease liability account to this configuration. This configuration is required for ALL customers regardless of lease portfolio.

Lease Expense- This will be the account where customers configure their lease expense. This is where lease expense will be coded for all operating leases. This configuration is required for ALL customers who have operating leases in their portfolio.

Note- If your organization does not have any operating leases then you can map any account to this configuration. This is where customers will sometimes create a "Not Applicable" account and map it to configurations that do not apply to their leasing portfolio.

Interest Expense- This will be where interest expense will be recorded. Interest expense is ONLY recorded on finance leases (not on operating leases). This configuration is required for ALL customers who have finance leases in their portfolio.

Note- If your organization does not have any finance leases then you can map any account to this configuration. This is where customers will sometimes create a "Not Applicable" account and map it to configurations that do not apply to their leasing portfolio.

Asset Depreciation Expense- This will be where depreciation expense will be recorded for finance leases. Depreciation expense is ONLY recorded on finance leases (not on operating leases). This configuration is required for ALL customers who have finance leases in their portfolio.

Asset Reduction- This is the account configuration that will reduce the ROU Asset every month for finance leases. Customers will typically either configure the ROU Asset or ROU Asset- Accumulated Depreciation accounts. This configuration is required for ALL customers who have finance leases in their portfolio.

Current Liability- This is the account where the current lease liability will be configured. This is required for ALL customers regardless of lease portfolio.

Non-current Liability- This is the account where the non-current lease liability will be configured. This is required for ALL customers regardless of lease portfolio.

Gain/(Loss) on FX- This is where an organizations Gain/(Loss) on FX will be recorded.

Note- If your organization does not have any leases denominated in foreign currency then you can map any account to this configuration. This is where customers will sometimes create a "Not Applicable" account and map it to configurations that do not apply to their leasing portfolio.

Gain/(Loss) on Termination- This is where organizations will record their Gain/(Loss) on terminating a leasing arrangement. This is recommended for ALL customers regardless of lease portfolio as all customers may eventually want to terminate a lease

Impairment Charge- This is where organizations will record their Impairment on a leasing arrangement. This is recommended for ALL customers regardless of lease portfolio as all customers may eventually want to impair a lease