Assessment of the Lease Term

Lease term recognition

The Soft4Lessee system helps to assess the lease term, taking into account:

  • the contractual lease term
  • the non-cancellable period
  • lease renewal/ lease extension options the lessee is reasonably certain to exercise
  • early termination options the lessee is reasonably certain to exercise

The estimated term becomes the base term lease liability calculation (the PV of the future payments over the term). The circumstances may change and the lessee may re-assess the lease extension or termination option at any point in time; the system will make a re-measurement to the lease liability accordingly.

The depreciation term for right-of-use would equal the estimated lease term (if the lessee does not get title of ownership to the asset at end of lease). In the case of a re-assessment of the lease term, the depreciation term will change in parallel (subject to ownership).

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Managing the lease term

Re-measurement is the process of re-evaluating the asset value or foreign currency on a company’s financial statements. There are several scenarios where a re-measurement is required. Asset re-measurement allows the lessee to have more accurate records on the balance sheet and may allow a deductible loss to be taken.

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What you can do with Soft4Lessee?

Manage your transition to IFRS 16/ ASC 842 standard without a headache

Data Import / Export

Import and export to/from other systems, using one of the following methods (or combination of methods): webservice, Excel files. Soft4Lessee can interface with other asset management, contract management systems, the general ledger system, and the management reporting system.

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Lease Agreement Data Management

Have a database of your lease agreements, with three major statuses – new agreements under consideration, active leases, and archived leases (expired, or terminated early). Import data from Excel sheets or populate data via webservice.

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As circumstances change, the system can calculate adjustments to lease liability and right-of-use asset value, and produce G/L postings accordingly.

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Reports for IFRS 16 Presentation and Disclosures

Get ready reports which you need for your financial reporting and prepare additional information for IFRS 16 disclosures.

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Accounting for Lease Liability

Calculate lease liability as the present value of lease payments, and the present value of amounts due at the end of the lease term, considering purchase or termination options. The system will automatically adjust lease liability as the circumstances change.

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Accounting for Right-of-Use asset

Calculate RoU Asset value considering lease liability, costs before lease commencement and the expected cost of asset return (e.g. costs of equipment dismantling, costs of restoring leased premises). If the lease liability is re-assessed, the RoU asset value changes accordingly.

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Handling of Non-lease component

If you have a composite contract that includes leases and services, the non-lease component is separated and posts to the operating expense account, separately from interest expense and asset depreciation expense, as required by IFRS 16.

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Managing Lease Modifications

The system allows lease modifications after the commencement date and will calculate the impact on lease liability and right-of-use asset. The system will produce G/L postings to reflect any lease modification.

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Lease status management

Track leases by numerous statuses – under consideration, active, archived, requested, quoted, signed or withdrawn, activated, extended, early-terminated, buy-out, expired.

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Variable Leases

If you have leases with variable lease payments dependent on an index (like the Consumer Price Index) or reference interest rate (like LIBOR, EURIBOR), the system is able to calculate re-pricing and reflect it in accounting, as per IFRS 16 requirements.

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General Ledger integration

Have required G/L transactions at each due date and at the end of the accounting period. You can download G/L transactions in detail or at summary level and feed them into your general ledger system via webservice integration, or via an Excel.

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Assessment of the Lease Term

Determine lease term by a number of circumstances – whether you are reasonably certain to execute the purchase option, or extension option, or terminate the lease before the end of the term.

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Parallel accounting under IAS 17 standard

For purpose of comparison and impact analysis, Soft4Lessee can calculate and post to General Ledge expenses as per previous IAS 17 standard. This can also be used in scenarios, when IFRS 16 applied at group consolidation level.

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Managing the multi-company businesses

If you have tens or hundreds of subsidiaries and account for leases per each legal entity, some functions can be run over multiple „companies“ in Soft4Lessee.

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Accounting Standards

Select the lease accounting standard

IFRS 16 lease accounting software

Under IFRS 16 businesses with large portfolios of operating leases will be impacted by the change in IFRS 16 lease accounting standards, as the new standard require lessees to recognize assets and liabilities arising from operating leases on the balance sheet. Get ready to meet the requirements and stay compliant with the standard with Soft4Lessee.

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ASC 842 lease accounting software

US GAAP standard ASC 842 will comes into effect on 1 January 2019. Companies, having large portfolios of operating leases will be influenced by this change as the standard requires all assets and liabilities regarding operating leases be presented on the balance sheet. Get ready to meet the requirements and stay compliant with the standard with Soft4Lessee.

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AASB 16 lease accounting software

AASB 16 introduces a single lessee accounting model requiring lessees to recognize all leases on the balance sheet, except for short-term leases and leases of low-value assets. This Standard applies to annual reporting periods beginning on or after 1 January 2019. AASB 16 is equivalent to IFRS 16 with extra paragraphs on Leasing Treatment for Non-Profit Entities. Stay compliant with the new standard with Soft4Lessee.

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