Classification for Leases that were Previously Evergreen but have been Renewed - Support Advisory

Issue

Leases that go into evergreen no longer create balance sheet entries and therefore show expense as incurred. Even if you rollback the evergreen event to record a contractual renewal, future activity will not create on balance sheet accounting and the off-balance sheet operating lease treatment persists.

Recommended Solution

When a lease goes into evergreen and is subsequently renewed, whether or not the evergreen event was rolled back, the resulting extension remains off balance sheet while the existing asset and corresponding accumulated depreciation stay on the books with a net book value of zero, until returned or bought out.

To rectify this and ensure accurate accounting, once the contractual renewal has been recorded, reclassify the lease.