Balance Adjustment Import Issues - Support Advisory
Issue
When a Balance Adjustment is imported to adjust ASC 842 accounting, it creates a net-zero remeasurement entry under IFRS 16.
When could the issue manifest?
When a balance adjustment is imported under any one standard, but lease is booked to multiple standards.
How does the issue manifest?
When a balance adjustment is recorded under one standard, it generates a net-zero remeasurement activity under the other standard. This redundant entry has no net accounting impact, but it does manifest as a remeasurement journal entry.
Recommended Solution
Since the redundant entry debits and credits the same accounts for the same amounts on the same ledger date bearing the same schedule reference, they wash in all reports. So, the journal entry is harmless and can be safely posted or disregarded, with no additional action required.
Issue
Balance Adjustment Import Does Not Work for only Accumulated Depreciation for Finance Leases
When could the issue manifest?
When performing a mid-term balance adjustment to a finance lease.
How does the issue manifest?
When performing a mid-term balance adjustment to a finance lease, a user tries to reset the Accumulated Depreciation – Finance Lease balance to zero, by entering the starting balance as zero.
Recommended Solution
Instead of entering the starting balance "0", adjust the balance to zero by reducing the accumulated depreciation balance by the amount of the balance at the end of the day before the adjustment. Note that there is currently the following limitation associated with mid-term balance adjustments: If the lease that has been subjected to a mid-term balance adjustment has an a Reasonably Certain (RC) renewal, when the RC renewal is subsequently recorded, it triggers an unwanted remeasurement of the liability and the asset using the fresh IBR applicable to the remaining term on remeasurement date. This may result in a slight change in the balances and impact the timing of downstream amortizations.
Issue
Unable to record a balance adjustment for the Deferred Rent of the Non-Lease Component of a lease that has both lease and non-lease components.
When could the issue manifest?
When a lease has both lease and non-lease components, and the user wants to adjust the Deferred Rent balance for the non-lease component.
How does the issue manifest?
User is currently prevented from recording such a balance adjustment.
Recommended Solution
Record a coterminous standalone Non-lease Component lease and adjust the Deferred Rent balance on that lease.
Issue
Balance Adjustment with Absolute Value, “Use as Starting Balance”, for Accumulated Depreciation overstated Asset and Depreciation after the subsequent Re-measurement Date
When could the issue manifest?
Balance Adjustment with Absolute Value for Accumulated Depreciation followed by subsequent remeasurement
How does the issue manifest?
Bug manifests when Balance Adjustment is uploaded with absolute value for Accumulated Depreciationand a remeasurement event gets recorded after the balance adjustment date. Without a remeasurement event after the balance adjustment, this issue does not manifest.
Recommended Solution
A balance adjustment for the desired change in the balance, “Apply as Adjustment to Calculated Balance”, can be uploaded instead of their absolute values.
Issue
Accounting Workbook does not take into account Balance Adjustment
When could the issue manifest?
When a balance adjustment is recorded and subsequently an Accounting Workbook is generated for the lease.
How does the issue manifest?
The Accounting Workbook reports the accounting disregarding the balance adjustment.
Recommended Solution
The Deal Analysis Report could be used in lieu of the Accounting Workbook. This is a more modern version of a report that provides amortization information together with underlying calculations and cell references. Note that the underlying accounting is accurate.