Generate an Adjusting Entries Analysis Report for the entire portfolio, for the first open month, out of Preview.

Download and open the new Adjusting Entries Analysis Report Pivot Template from Ask Alex or the Success Center. 

Copy and Move the Adjusting Entries Analysis tab to the Pivot Template.

In the Pivot Template, go to the RUN tab and click Generate Pivots.

Once the pivot tabs have been created, Save this file.

Generate a Portfolio: Trial Balance Report for the first open month in Preview.

Scroll to the bottom section of the report called the Portfolio Trial Balance Analysis Grid. Scroll down to the bottom of this table and to the left you will find the download icon to enable you to download to Excel.

Within the Portfolio: Trial Balance Report, create a pivot table where:

• Row Labels are Account Description

• Columns are Months and Month End Date

• Values are Sum of Amount

Repeat steps 6-8 from your Production environment.

On a separate Excel sheet, compare the balances by Account Description from Preview and Production.

Note the variances by account that are significant enough to merit further investigation.

Caution: The variances would include any activity recorded in Production since the Production data was copied over to Preview.

Where an event included recognition of one or more evergreen payments (explicit or implied), whether RC or not, subsequent events could be posted using the wrong accounting treatment.

Changes due to the way in which fractions smaller than one cent (or equivalent in applicable currency) are handled by the new code.

Corrections of attribution of past adjusting entries to specific fiscal periods that swap out the inaccurate fiscal period for the accurate one. See also Wash entry below.

Most commonly appearing to shift an accounting entry from one historical period to another. Generally, these are corrections to address incomplete attribution of prior adjusting entries. One leg of the new adjusting entry reverses the adjusting entry, which was not properly linked to the adjusted date, while the other leg of the new adjusting entry links to the originally adjusted date. This will be important for functional balances as we continue with our improvements around FX.

When a lease is booked into multiple ledgers with the policy election to ignore reasonably certain holding period (RCHP), but an RCHP is specified that is longer than the contractual term, there is different behavior between the ledgers on RC renewal date. Those ledgers that do respect RCHP regardless of the policy election (standalone ASC 842 and IFRS 16 ledgers) will not remeasure, as the RCHP was already taken into account for initial takedown. However, the FX date for asset-related journal entries (e.g. depreciation) was being changed to the renewal date as if there had been a remeasurement, due to the remeasurement in other ledgers. This has been corrected, and the FX date is now properly reflected in all ledgers.

Where a scheduled IDC, Lease Incentive, or Deposit was captured in the system with an explicit product category designation such that the lease contains assets of a different product category, the amounts were previously allocated across all assets incorrectly, and could be doubled in the case of deposits. Adjusting entries will reallocate the scheduled related expense to the applicable assets and will eliminate the erroneous doubling of deposits.

A disbursement Import (manual/API) was the last event recorded prior to transition, and transition reclassification was lost. Impacted deals would have been subjected to adjusting entries that reversed the transition classification and reinstated pre-transition accounting, typically incorrectly taking the lease off the balance sheet.

Modified capitalized-operating schedules with step payment structures and/or lease start dates other than beginning fiscal month dates now reflect accurate capitalized interest expense for both the final month of the original schedule (aka Left-Hand-Side) as well as the first month of the modified schedule (aka Right-Hand-Side). This update includes schedules paid in advance as well as arrears.

Changes to payee code were not properly reflected on cash flow journal entries. If payee code is used, but not included in the GL coding, it may produce what appear to be useless adjusting entries, but those ensure that the Payables Export reflects the proper payee code.

Balance adjustments recorded for dates other than lease start date prior to 24R2 may have resulted in hanging balances. These adjusting entries resolve those scenarios.

In some cases, where a deal went into evergreen for a period of time and was subsequently renewed with one or more term renewals exceeding 12 months in length, the lease remained on balance sheet for the duration of the lease. The lease should go off balance sheet on going into evergreen. If you want the lease to return on balance sheet with the term renewals, you must explicitly perform a classification of the deal effective the start of the term renewal at which you want the lease to return on balance sheet. Where deals were erroneously left on balance sheet, the erroneous accounting will be reversed and replaced with off balance sheet treatment.

In certain situations, notably where a renewal or implied evergreen starting during but extending beyond the end of the reasonably certain holding period (RCHP), events subsequent to the renewal but before the actual end of RCHP could be posted using the wrong accounting treatment.

Leases which went through both an evergreen period and a term renewal could erroneously post entries to reverse the fully depreciated assets off the balance sheet on the second renewal (whichever occurred second), resulting in negative assets and/or hanging balances in the Lease asset and Accumulated Depreciation accounts. These adjustments ensure that fully depreciated assets are not reversed off the balance sheet until terminated.

In some circumstances, leases with one or more impaired assets which were terminated left hanging balances in the Allowance for Impairment account. These adjustments ensure the appropriate writeoff of Allowance for Impairment account balances on termination.

Leases which underwent a partial termination and were subsequently terminated, modified, or renewed could erroneously post entries to reverse the fully depreciated assets off the balance sheet, resulting in negative assets and/or hanging balances in the Lease asset and Accumulated Depreciation accounts. These adjustments ensure that fully depreciated assets are not reversed off the balance sheet until terminated.

Reposts penny rounding associated with asset accounts to properly reflect the takedown date of the asset for FX purposes.

"Hopscotch" events no longer create odd expense patterns or hanging balances. The date entered (effective date of remeasurement) used to process each event is validated against the core principles -- the date entered cannot follow the actual date of the event and must be aligned with the first day of a fiscal period -- so that events are processed in logical, chronological order, regardless of how they are entered into the system.

With the majority of penny entries now being suppressed during the lease-life, an entry is now posted at either termination or the reasonably certain end of the lease. These entries represent an accumulation of the suppressed entries.

Explanation

With the rounding augmentation in place, small fluctuations in the monthly straight-lined depreciation and straight-lined expense will often occur. Cumulative adjustment entries in the first open period to correct existing transactions based on the new code.

Deals classified in only a subset of the standards into which the deal is booked were not appearing on reports for the non-classified standards.

Such deals will now be reported, with NonLease treatment.

Adjusting entries associated with accounting enhancements in the 21R3 release inadvertently created hanging balances for schedules with no liabilities and zero payments in which the Balance Adjustment process was used to load Asset and Accumulated Depreciation balances. This unique, unusual scenario has now been resolved.

Partial terminations which specify a surviving rental amount in the same period as a one-time (non-remeasuring) payment adjustment were mishandling the impacts on Capitalized-Operating SLE calculations. The termination writeoff is now adjusted to ignore the payment adjustment for purposes of calculating any gain or loss, and appropriate adjustments to expense recognition are posted to appropriately recognize the one-time payment adjustment in the fiscal period.

For 4/4/5 filers, unusual fluctuations in expense could occur when an accounting event landed in a five-week month that also included two payments. For example, a partial termination between the two payments specifying a surviving rental amount could miscalculate SLE by including both payments in the remeasurement calculations. These fluctuations have been corrected, resulting in much improved, consistent SLE.

Terminations always occur at the end of the day. Where terminations are recorded on the first day of a payment period (typically in error) for a Capitalized-Operating lease, straight-line expense will be recognized for that day.

Expense recognition has been adjusted for early terminations, most notably in the case of early buyout, to ensure proper recognition of Gain (Loss) and appropriate valuation of any Purchased Asset.

Backdated modifications on the first day of the lease now clear out any accounting for the lease. Note, however, that this is not best practice. Best practice suggests you should either edit the deal to correct it, or delete and re-enter the deal correctly. If this is a middle deal in a modification chain, roll back the modification and re-enter the modification correction.

Otherwise, you will not get appropriate reallocation entries, as there is no active window for the middle lease in the modification chain from which to pull coding.

One-time payment adjustments and recurring payment adjustments of reason type Other which affect payment on the transition date are no longer included in the transition remeasurement. Recurring payment adjustments of reason type Change in Underlying Index Rate which affect payment on the transition date are no longer included in the transition remeasurement for ASC 842 if they were recorded on or after the transition date.

Payment adjustments from the first day of the lease are now processed. (Previously, the payment adjustment was ignored.) Note, however, that this is not best practice and is no longer allowed in the application. Best practice suggests you should either edit the deal to correct the payment schedule, or delete and re-enter the deal with the correct payment schedule.

When recording a partial termination, the UI provides a field to specify the surviving payment, which is auto-calculated at the time of recordation. If a payment adjustment effective the same date is recorded after the partial termination, it will typically be lost, because payment adjustments apply at the beginning of the day and terminations apply at the end of the day. The recommended approach to handling this is to correct the surviving payment on the recorded partial termination to incorporate the payment adjustment. Going forward, if it is desired to record the payment adjustment and termination separately, record the payment adjustment first.

When a lease is booked into multiple ledgers with the policy election to ignore reasonably certain holding period (RCHP), but an RCHP is specified that is longer than the contractual term, on RC renewal, those payments did not appear in ASC 840 / IAS 17 standalone ledgers, nor in transition ledgers if the lease started prior to transition, because the payments had already been recognized and accounted for in an ASC 842 / IFRS 16 standalone ledger. Those renewals and their associated payments are now properly recognized, along with any necessary remeasurement associated with a term renewal, in ledgers that did not respect RCHP at the time the lease was booked. This is particularly relevant to "transition straddle" deals which start before transition with an RCHP specified (but ignored) and are then subsequently renewed, either before or after transition.

Where a reasonably certain holding period (RCHP) was specified that was less than the contractual term, LeaseAccelerator was respecting the reasonably certain holding period specified by the user for purposes of payments and amortization, despite the lease starting prior to transition with the policy election checked to ignore RCHP. (With the policy election checked, reasonably certain holding period should be ignored prior to transition and in standalone ASC 840 and IAS 17 ledgers.) Now, the RCHP is properly ignored and the accounting is consistent with the policy election, showing payments and amortization over the contractual term.

These small adjustments are to ensure that the overall entry related to the payment on a finance lease are balanced. These entries typically include a credit to Accounts Payable Clearing and debits to the Liability and Interest Accrued accounts.

These small adjustments are to ensure that the Long-Term Liability account balance zeroes out in the final fiscal year in which the lease is on balance sheet.

A reallocation was the last event recorded prior to transition, and transition reclassification was lost. Impacted deals would have been subjected to adjusting entries that reversed the transition classification and reinstated pre-transition accounting, typically incorrectly taking the lease off the balance sheet. See also A/P Reconciliation prior to transition was masking transition above.

In rare circumstances -- where a lease had multiple reasonably certain term renewals with different payment amounts, as well as a reasonably certain evergreen period following those term renewals -- the wrong renewal payment was used for the RC evergreen period when calculating the initial takedown.

In circumstances where a lease underwent multiple changes, including and typically after going into evergreen, sometimes the fully depreciated asset was prematurely reversed off the books. These entries put the fully depreciated asset back on the books.

In rare circumstances, evergreen payments were not properly carried forward and simply stopped without the lease actually having been terminated.

Previously, when a step payment adjustment was recorded for a deal in evergreen, the depreciated portion of the asset was removed from the books prematurely. The depreciated portion of the asset and its offsetting Accumulated Depreciation balance are now retained on the balance sheet including until termination.

All remeasurements -- transition, renewal that implicitly extends RCHP, recurring payment adjustments, and partial terminations that specify a surviving rental amount that changes the surviving rental amount -- are now aligned with the first day of the fiscal period in which the remeasurement applies. This can result in small differences in PV, meaning the remeasured liability, asset, and all associated amortization and depreciation, are subject to small adjusting entries. However, it also eliminates the need for mid-month proration of expense, particularly where the expense may be changing due to the remeasurement, and with the possible added complexity of 4/4/5 calendars. The new model is far easier to validate.

Explanation

Corrections to hanging balances in the Obligation LT account when a renewal or payment adjustment was recorded before transition, but with an effective date of the renewal or payment adjustment after transition.

Term renewals which start on the transition date (e.g. 1/1/2019) are now assumed to have been known prior to transition, and are included in the transition remeasurement.

Changes resulting from adjustments to classification or journal entry configuration that cancel each other out with no net impact at the account level.

This rare adjusting entry presented due to the time bubble issue that is more detailed in the 23R1 release notes. Please refer to those for more information.

For leases with a start date on the 27^th, 28^th, 29^th, or 30^th of the month, such that a reasonably certain term renewal is recorded that does not change the reasonably certain holding period (RCHP), date calculations may have erroneously concluded that the RCHP had been extended by a month, driving an unnecessary remeasurement.

When a lease goes into evergreen, unless the evergreen was reasonably certain, the accounting treatment changes to Operating lease treatment. If the evergreen event is not actually recorded, the system will still treat additional payments as implicit evergreen. However, because there is no event recorded, the expense for the first month of evergreen is still recorded as a full month of expense. With a mid-month start date, if the lease is terminated in the same fiscal period in which the lease went into evergreen, there may be accounting irregularities due to the expense recognition. The correction for this is to either adjust the termination date to be the last day before evergreen begins, or roll back the termination, record the missing evergreen, and then record the termination.

Correction to deferred rent on a lease modified to add assets that now correctly applies unamortized deferred rent balance only to transferred assets, and not to assets added as a part of the modification.