Adding Leases
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      Recording Favorable or Unfavorable Leases in LeaseCrunch

      When business combinations occur, there may be situations in which the ROU Asset should be adjusted accordingly. To record leases as required by the guidance, follow the steps below:

      New Reporting Entity and Initial Application Date

      In some acquisitions, it may be necessary to create a new Reporting Entity with the acquisition date as the Initial Application Date (must use the first of the month as the Initial Application Date). 

      In most cases the acquired leases would be considered new leases therefore the Start Date of the lease should be 1 day after the Initial Application Date of the new Reporting Entity.

      If any existing balances need to be brought through in regards to an acquisition, it would be considered a transition lease and the Start Date of the lease should be the same as the Initial Application Date of the new Reporting Entity.

      Recording the Lease in the LeaseCrunch Software

      When adding the lease to LeaseCrunch software, note the following on Step 2 - Lease Payments & Classification:

      • If the ROU Asset should be reduced (unfavorable terms), enter the amount of the reduction in the Lease Incentives field. 

      • If the ROU Asset should be increased (favorable terms), enter the amount of the increase in the Initial Direct Costs field. 

      Outside of the LeaseCrunch Software

      In addition to the Journal Entry from LeaseCrunch, an adjusting Journal Entry outside of the LeaseCrunch software from the Cash/AP Clearing account to goodwill recognized in the acquisition accounting is also required. 

      Unfavorable (ROU Asset reduced)

      Dr. Goodwill

      Cr. Cash/AP Clearing

      Favorable (ROU Asset increased)

      Dr. Cash/AP Clearing

      Cr. Goodwill

      Note: If a payment is made at the beginning of the lease, make sure to isolate the favorable/unfavorable amount from the Cash/AP Clearing line item of the Journal Entries Report. The Lease Tab of the report will provide the amount in either the Incentives Received or Initial Direct Costs fields.

      For further questions, please reach out to our Support Team at support@leasecrunch.com