Entering and Maintaining Subleases

Sublease Help Page Summary

This tutorial page will instruct you on using the Sublease feature for a specific Lease. The Sublease page will be displayed for all lease types. For iLeasePro general navigation instructions, please visit the QuickStart General Navigation page.

Using the iLeasePro Sublease Feature

The iLeasePro Sublease feature will allow the user to account for subleases that are classified as operating subleases. Accounting is not available for non-operating subleases.

The iLeasePro operating sublease module accumulates all of the revenue over the term of the sublease and recognizes that revenue equally on a straight-line basis over the term of the sublease. Any initial direct cost associated with the sublease is deferred on the balance sheet and recognized as an expense on a straight-line basis over the term of the sublease (unless some other systematic method of amortization is appropriate).

Account receivable journal entries will be created by the user in this module. And the Operating Sublease Receipt & Expense Schedule can be viewed.

Prerequisites

The General Ledger Accounts for each Corporate Subsidiary within the Account need to be added by the Administrator under the Admin > Account Settings > Lease Accounting tab.

 

Select Subsidiary/Operating Entity

Add in the correct General Ledger Accounts for each of the Sublease account entries

 

Sublease Sections

Entering or Updating the Operating Subleases

Operating Subleases Accounting

Creating an accounts receivable journal entry

Example Journal Entries

Operating Subleases Receipt & Expense Schedule

Working with a Lease that has Terminated Early

Document Management

 

Entering or Updating the Operating Subleases

The sublease module within iLeasePro will allow the user to account for subleases that are classified as operating subleases. The iLeasePro Sublease Classification wizard should be completed to determine if the sublease is a finance or operating sublease.

Select the lease from the Lease Landing page

Select Subleases from the popup menu

Sublease Commencement Date: Enter or select from the calendar date picker the commencement date of the sublease

Sublease Expiration Date: Enter or select from the calendar date picker the expiration date of the sublease

Select either the Operating or Finance radio button to identify the Sublease Accounting Method

• If the Sublease is classified as an Operating lease, the user should continue entering the required data values for the sublease
• If the Sublease is classified as a Finance lease, the user should look for other alternatives to account for the sublease. Note that access to the Sublease Accounting feature will be restricted for this sublease as shown below

Sublease Name: Enter in the Sublease Name

Relieved of Obligations: Select if the lessee will be relieved of obligations of this sublease.

• If the lessee is relieved of the primary obligation under the head lease, the user should select the “Yes” radio button next to the Relieve of Obligations label. By indicating that the lessee is relieved of the primary obligation under the head lease, the lease accounting feature for this sublease will be restricted and the transaction is considered a termination of the original lease. The lessee derecognizes the Right of Use Asset and the Lease Liability with the difference being recognized in profit or loss, after providing for any payments or receipts made in conjunction with being relieved of the primary obligation and any guarantees by the lessee (similar to the accounting for the early termination of the lease). Additional information can be found below Working with a Lease that has Terminated Early on page 14.
  • The user must enter in or select from the calendar date, the early termination date of the head lease. No further information is required for this sublease.
• If the lessee is NOT relieved of the primary obligation under the head lease, the user should select the “No” radio button next to the Relieve of Obligations label and continue entering the sublease information.

Sublease Security Deposit is an optional field to record the amount that has been paid by the sublessee as a security deposit

Enter the Initial Direct Cost Amount. Initial Direct Costs as defined in Standard 842 are composed of incremental costs ,if any, incurred as a result of the lease being executed. Note that initial direct costs include commissions paid to brokers but exclude many costs that had been considered initial direct costs under prior GAAP provisions.

Enter the Sublease Gross Income over the entire Sublease Term

The Sublease Lease Term (Months) is calculated as the difference between the Sublease Commencement Date and the Sublease Expiration Date

The Periodic Sublease Income is calculated by dividing the Sublease Gross Income Over Term by the Sublease Lease Term value

The Periodic Expense Direct Cost is calculated by dividing the Initial Direct Cost Amount by the Sublease Lease Term value

Sublease Lease Term Override: Enter, if applicable, the Sublease Lease Term Override in months. The Sublease Lease Term Override should be entered when circumstances indicate that another period, other than the term of the sublease, should be used to recognize the sublease income.

If the Sublease Lease Term Override is entered

• The Periodic Sublease Income is calculated by dividing the Sublease Gross Income Over Term by the Sublease Lease Term Override value
• The Periodic Expense Direct Cost is calculated by dividing the Initial Direct Cost Amount by the Sublease Lease Term Override value

Operating Subleases Accounting

The Operating Sublease Accounting allows a user to create the accounts receivable journal entry for the month that is entered or selected. The Operating Sublease Accounting section will only be available for those subleases that have been classified as Operating subleases and/or not Relieved of Obligations.

If the Sublease has been classified as a Finance lease, the following message will be displayed and the Sublease Accounting feature will be disabled

If the Sublease has been Relieved of Obligations, the following message will be displayed and the Sublease Accounting feature will be disabled

Creating an accounts receivable journal entry

The Total Sublease Income value will be used to create the periodic accounts receivable

Enter or select from the calendar date picker the Payment Date.

If an accounting software integration has been established by your administrator, the Upload Sublease Journal Entries button will be displayed indicating that a journal entry can be created and uploaded via webservices.

• A message will be displayed indicating whether the upload was successful or not

If you would like to create and export the journal entry to excel, click on the Export Sublease Journal Entries button.

• An Excel worksheet will be opened with the journal entry information populated. Save this file to your desktop. This file can be imported into any accounting system that accepts excel imports. Example below;

Example Journal Entries

Scenario 1: Sublease Lease Term Specified 

Gross Income Over Term	$20,000.00
Sublease Lease Term (Months)	36
Sublease Lease Term Override (Months)	0
Periodic Sublease Income	$555.56
Initial Direct Cost	$10,000.00
Periodic Expense Direct Cost	$277.78

Monthly Journal Entry	Debit	Credit
Accounts Receivable - Sublease	$555.56
Sublease Income		$555.56
Sublease Initial Direct Cost Expense	$277.78
Sublease Deferred Initial Direct Cost		$277.78

One time Journal Entry for First Month to capture Initial Direct Costs (on Commencement Month)

Journal Entry	Debit	Credit
Sublease Deferred Initial Direct Cost	$10,000.00
Accounts Payable		$10,000.00

Scenario 2: Sublease Lease Term Override Specified 

Gross Income Over Term	$20,000.00
Sublease Lease Term (Months)	36
Sublease Lease Term Override (Months)	20
Periodic Sublease Income	$1,000.00
Initial Direct Cost	$10,000.00
Periodic Expense Direct Cost	$500.00

Monthly Journal Entry	Debit	Credit
Accounts Receivable - Sublease	$1,000.00
Sublease Income		$1,000.00
Sublease Initial Direct Cost Expense	$500.00
Sublease Deferred Initial Direct Cost		$500.00

One time Journal Entry for First Month to capture Initial Direct Costs (on Commencement Month)

Journal Entry	Debit	Credit
Sublease Deferred Initial Direct Cost	$10,000.00
Accounts Payable		$ 10,000.00

Scenario 3: Sublease Lease Term Override Specified & Indirect Costs = 0

Gross Income Over Term	$20,000.00
Sublease Lease Term (Months)	36
Sublease Lease Term Override (Months)	20
Periodic Sublease Income	$1,000.00
Initial Direct Cost	$     -
Periodic Expense Direct Cost	$     -

Journal Entry	Debit	Credit
Accounts Receivable - Sublease	$ 1,000.00
Sublease Income		$ 1,000.00

Operating Subleases Receipt & Expense Schedule

Once the key information has been entered for the Sublease, the Operating Sublease Receipt & Expense Schedule will be displayed and show the expected Income Amount and Direct Cost Expense by Month within the lease term (or override term) specified by a user.

Working with a Lease that has Terminated Early

If the status of the current lease has been set to “Early Termination” and the current select Month and Year is equal to the Early Termination Month and Year, the user will be asked to enter in any Early Termination Payment or Receipt Amount. The Early Termination Gain/Loss will be calculated based on the current lease information gathered.

Early Termination Journal Entry. To export the journal entry with the early termination gain or loss included to an excel spreadsheet, simply click on the Export General Ledger button as shown. Example below;

Additional info can be found at Handling Leases with Early Termination

Document Management

For detailed explanation on uploading an electronic document into iLeasePro, please reference the Upload Document Help Page.