Journal entries for remeasurement and adjustments in Lease and Asset Accounting
- Lease term is extended.
Lease Accounting uses these actions:
- Debit right-of-use asset and credit lease liability.
- Adjust the amortization of the lease to straight line the new remaining amount.
Asset Accounting uses these actions:
- Adjust the asset value.
- Adjust depreciation going forward based on the new book value.
- Lease term is reduced.
- Debit the lease liability and credit the assets.
- Lessee changes decision relative to exercising purchase option similar to reducing the lease term above.
- Full lease termination
- Debit lease liability and credit assets for termination amount or full lease amount multiplied by the carrying amount of asset.
- Debit/Credit Gain/Loss for difference
- If, after remeasurement, the lease is no longer classified as a finance
lease but is now an operating lease, then an additional journal entry must be created:
(new carrying amount of the asset) – (original carrying amount of the lease)
Same journal entry as a rent prepayment or lease incentive.