This chapter contains the following topics:
The Financial Accounting Standards Board (FASB) controls the accounting standards in the United States to ensure that financial statements are in accordance with Generally Accepted Accounting Principles (GAAP). Ruling 13 from that board, states that the revenue from rent (recurring billings) must be recognized evenly (as a straight line) over the life of the lease. The difference between the straight-line rent that the system calculates and the actual rent that you bill the tenant (or pay the landlord) must be reflected in the general ledger.
These examples illustrate the actual rent amount for three years and the effect of Straight-line Rent.
This table illustrates the actual rent for the lease term January 1, 2007 – December 31, 2009:
|Time Period||Actual Rent|
|January 1, 2007 to December 31, 2007||15,000|
|January 1, 2008 to December 31, 2008||20,000|
|January 1, 2009 to December 31, 2009||25,000|
This table illustrates the effect of Straight-line rent for the lease term January 1, 2007 – December 31, 2008:
|Time Period||Actual Rent||Straight-Line Rent||Accrual/Deferral*|
|January 1, 2007 to December 31, 2007||15,000||20,000||5,000|
|January 1, 2008 to December 31, 2008||20,000||20,000||0|
|January 1, 2009 to December 31, 2009||25,000||20,000||(5,000)|
*Straight-line rent minus actual rent
To calculate the effect of straight-line rent, the system adds the rent amounts for the entire lease term, and then divides the sum by the number of months in the lease term. Then the system subtracts the actual rent from the straight-line rent to determine the amount of the accrual or deferral that must be recorded in the general ledger. GAAP states that accruals and deferrals must be recognized in the financial statements.
A positive difference is an accrual. In the example, you received 15,000 in cash the first year, but you earned 20,000 based on Straight-line rent processing. Therefore, the system generates an accrual entry to debit the account for accrued/deferred rental income and credit the account for rental revenue.
A negative difference is a deferral. In the example, you received 25,000 in cash the third year, but you earned 20,000 based on Straight-line rent processing. Therefore, the system generates a deferral entry to debit the account for rent revenue and credit the account for accrued/deferred rental income.
Note:The net sum of the accruals and deferrals over the life of the lease should be zero.
To accommodate changes to FASB regulations, and provide greater flexibility for Straight-line rent processing, the following updates have been made:
Users can define which bill codes they want to include in straight-line rent processing during bill code setup. That value is then used as a default during recurring billing setup for a lease. You can override the default value on the recurring billing setup.
Previously, users could identify up to 10 bill codes on the processing options of the R15130. Only those bill codes were included in straight-line rent generation. Now, you can define in the processing options for the R15130 whether the system uses the bill codes defined in the processing options, or whether the system uses the straight-line rent bill code designation defined in the recurring billing setup.
See Section 21.3, "Generating Straight-line Rent Information" and Section 2.4, "Setting Up Bill Codes and Adjustment Reason Codes" for more information.
The Advanced Real Estate Forecasting system was also updated to enable users to define the bill codes that they want to include when creating real estate forecasts using the P15L106 (AREF Recurring Bill Code Rules program).
Previously, users could identify up to 10 bill codes on the processing options of the R15L1091 (AREF Budget Calculation program). Only those bill codes were included in straight-line rent processing for the assumption. Now, you can define in the processing options for the R15L1091 whether the system uses the bill codes defined in the processing options, or whether the system uses the straight-line rent bill code designation defined in the AREF Recurring Bill Code Rule program (R15L106).
Additionally, the R15L130, which is generated when you run the R15L1091, has been updated to print bill code error messages based on whether the system is using bill codes from the processing options, or straight-line rent designations from the AREF Bill Code Rule setup.
The Straight-line Rent Generation program (R15130) was updated to accurately regenerate Straight-line Rent information in the event of the early termination of a lease. Previously, when you ran the R15130 using an As Of Date that was greater than the end date of the lease, the program would produce an error.
See Section 21.4, "Reviewing and Revising Straight-line Rent Information" for additional information.
Users can view, and if allowed, update the Straight-line Rent Generation flag on the recurring billing records of a lease.
See Section 8.3.2, "Understanding Recurring Billing for Straight-line Rent (Release 9.2 Update)" for additional information.
The system has been updated to more accurately identify records that have changes that could impact Straight-line Rent processing, and might require straight-line rent information to be regenerated.
See Section 21.4, "Reviewing and Revising Straight-line Rent Information" for additional information.
The following reports have been updated to display the Straight-line Rent Generation option:
Bill Code Listing report (R15450)
Recurring Billing Listing report (R154011)
Lease Master Listing report (R15401)
The Straight-line Rent Revisions program (P1513) has been updated to include a new inquiry form that enables users to view all records in the F1513B table, across leases, that might require straight-line rent processing to be regenerated due to changes that were made after the information was last generated.
This program has also been updated to enable users to update the Straight-line Rent Generation Control field for a group of selected records. The program also enables users to select a record, and use a new Row menu option to roll back all records that have the same lease, building, unit, and batch number as a selected record to the previous generation of straight-line rent.
These changes provide users with an easy way to view all of the records that have been marked for straight-line rent regeneration, and to update those records if they determine that regeneration is not required.
See Section 21.4, "Reviewing and Revising Straight-line Rent Information" for additional information.
The Real Estate Management Constants program (P1510) has been updated to include straight-line rent fields. When leases are created after these constants have been defined, the system automatically adds those default values to the leases. You can set the processing options on the P1501 and P1502 to specify whether users are allowed to override the default straight-line rent values that are populated from the constants.
See Section 2.1, "Setting Up Constants" for additional information.
The Lease Information program (P1501) has been updated to support lease-specific straight-line rent setup. When you create a lease, the system looks to the Real Estate Management Constants program (P1510) to determine if default straight-line rent setup information exists. If default information is available in the constants, the system automatically updates the lease with the default values. Processing options on P1501 determine whether you can update those values.
If the processing options enable you to change the straight-line rent setup information on a lease, you access lease-specific straight-line rent setup information using the Setup Straight-line form menu option on the Lease Master Revisions form.
Additionally, a new program, Lease Straight-line Rent Setup (P15131), has been created to enable users to review, and if allowed, update the straight-line rent setup for leases. The program allows you to use filter criteria to view all leases that have straight-line rent setup information, to view all leases that do not have the setup, or to easily review the setup for all leases.
This new program also includes the Append on Regeneration option, which enables users to specify whether, when a lease term has been changed, the subsequent run of the R15130 appends the straight-line rent records associated with the new lease term to the existing straight-line records, or if the existing records are deleted, and straight-line rent records for the lease are regenerated.
You can also access this new program from the Recurring Billing Revisions form.
See Section 4.2.4, "Understanding Straight-line Rent Processing for Leases", Section 4.2.10, "Entering Straight-line Rent Setup Information for Leases (Release 9.2 Update)", and Section 8.3.7, "Forms Used to Enter Recurring Billing Information"for additional information.
The Straight-line Rent R.B. Update program (R15132) has been updated to enable users to enter lease version selection information in the processing options.
See Section 21.5, "Updating Recurring Billing Records with Straight-line Rent Information" for additional information.
The Lease Global Update program (R15117) has been updated with a new processing option that enables users to specify that they want to update the Straight-line Rent Revisions table (F1513B) when the program is processed.
See Section 25.7, "Updating Leases Globally" for additional information.
This table describes the steps of the straight-line rent billing process:
|Define straight-line rent bill codes||You must define which billing codes, which are used when setting up recurring billing records on a lease, should be included in straight-line rent processing.
(Release 9.2 Update) There are two methods you can use to define billing codes for straight-line rent processing:
Additionally, you use the processing options on the R15130 to specify which of the above methods the system uses when generating straight-line rent information.
|Generate straight-line rent information||Run the Straight-line Rent Generation program (R15130) to calculate the effect of straight-line processing on the rent that you bill. The system calculates the straight-line rent for each period, compares it to the actual rent for the period, and determines the accrual or deferral (adjustment) amount.|
|Update recurring billings with straight-line rent information||Run the Straight-line Rent Recurring Billing Update program (R15132) to generate the straight-line rent recurring billing records that you process into general ledger entries.|
|Generate the billing edit register||After you generate recurring billings, you must run the Billing Edit/Register program (R15300) to ensure that the batch is ready to post.
(Release 9.2 Update) The R15300 has been updated to determine if billing records should be included in the revenue recognition process. The program compares the information on the billing transaction to the revenue recognition trigger configuration, and if the record should be included in the revenue recognition process, the system validates that the appropriate AAIs and accounts are set up.
Be aware that billing records that have been through straight-line rent processing should not also be included in revenue recognition processing. It is important to review this report before posting invoices to ensure that none of the invoices that have gone through straight-line rent processing will be included in revenue recognition process.
|Review and approve batches (optional)||If the Manager Approval of Input option is enabled in the Accounts Receivable or Accounts Payable constants, the system changes the batch status to pending when you successfully generate the billing edit register. You must approve batches that are in a pending status before you can post them.|
|Post Real Estate invoices and vouchers||When batches are at a status of Approved, they are ready to post. Depending on how the lease is set up, you run either the Post RE Invoices to generate invoices or the Post RE Vouchers program (R15199) to generate vouchers.
You can use either version of the program to post accrual entries, but you should post the entries in a separate batch. You can segregate billing records that generate accrual entries from other billing records by specifying in the data selection for the post program that the transaction type equals A.
(Release 9.2 Update) This program has been updated to send invoices that contain billing transactions that meet revenue recognition trigger criteria through the revenue recognition process. Before you run this program, be sure that your invoices do not include both straight-line rent transactions and revenue recognition transactions.
|Print real estate statements (optional).||If you print real estate statements, use the Print RE Statements program (R155001).|
|Print real estate invoices (optional).||If you print real estate invoices, use the Print RE Invoices program (R15500).|
Some billing transactions that are generated through the Real Estate Management system will require straight-line rent processing. Others will require revenue recognition processing. Typically, you use bill code values to identify these different types of transactions.
To determine which billing transactions are sent through revenue recognition processing, you set up a trigger hierarchy. When defining your trigger hierarchy and Real Estate Management system setup, be aware of the following:
A transaction should not be included in both straight-line rent and revenue recognition processing.
You must define your trigger configuration to ensure that transactions that should be processed through straight-line rent are excluded from the revenue recognition process.
If an invoice contains both straight-line rent transactions and revenue recognition transactions, the entire invoice is sent through revenue recognition processing. Therefore, be sure that you do not include both types of transactions on a single invoice.
You can identify transactions that will be included in revenue recognition processing by running the Billing Edit/Register report (R15300). Review this report carefully before posting invoices to ensure that transactions are not included in both processes.
See Setting Up Revenue Recognition Triggers for Real Estate Management in the JD Edwards EnterpriseOne Applications Accounts Receivable Implementation Guide.
To generate straight-line rent information, you run the Straight-line Rent Generation program (R15130). When you run this program, the system writes records in the F1513B table. Before running this program, review and set the processing options to ensure that the information is generated correctly.
Note:After you run this program, it is possible that you will change lease data that could impact generated straight-line rent information. You can rerun this program to regenerate information for records that require recalculation.
See Section 21.4, "Reviewing and Revising Straight-line Rent Information" for more information.
To access the R15130, select Straight-line Rent Generation from the Straight-line Rent menu (G1528).
When you run the Straight-line Rent Generation program (R15130), the system calculates the effect of straight-line rent by performing these steps in sequential order:
The system determines the start and end dates to use to generate straight-line rent information.
(Release 9.2 Update) Using processing option 11 (Straight-line Rent Setup) on the Process tab, the system determines if it retrieves the start and end date from the Straight-line Rent setup on the lease, or whether it uses the values that are defined in the processing options of the R15130. If it uses the processing option values, it determines the dates as follows:
Start date - The system uses the Lease Term Date Selection processing option to determine whether to use the start date of the lease or the move-in date on the unit. Then, based on the date in the Straight-line Rent As of Date processing option, the system uses whichever date is later, the as of date or the lease start date (or move-in date on the unit).
For example, if the Straight-line Rent As of Date processing option is set to June 1, 2007, and the Lease Term Date Selection processing option is set to use the start date on the lease, which is June 20, 2007, the system uses June 20, 2007 as the start date for the straight-line rent generation.
End date - The system generates straight-line rent information through the date specified in the Lease Term Date Selection processing option (either the end date of the lease or the plan-out date on the unit).
Note:Regardless of the end date on the lease (or move-out date on the unit), the maximum number of months that the Straight-line Rent Generation program can process is 1188, or 99 calendar years beginning with January.
Additionally, the value of the century change year data item (CENTCHG) can affect the end date that the system uses because it affects the cutoff date for the century. For example, if the value of CENTCHG is 20, the cutoff year for processing FASB is 2020, regardless of the length of the lease. If the leases that you process have long terms, verify that the value of this data item is set to a number that represents the longest lease term that you process.
If the system retrieves the start and end date information from the lease, users have the ability to use the same options as described above, but can also set up user-defined start and end dates that the R15130 can use to process straight-line rent information.
The system generates a batch for processing and retrieves information from these tables based on the start and end dates:
The system calculates the number of months that each unit is occupied from the Lease Master Header table (F1501B),
The system determines the base rent amounts for the occupied units from the Recurring Billings Master table (F1502B),
Using FASB 13 Rounding Option processing option on the Process tab, the system determines whether the system rounds the straight-line rent amounts to the nearest whole number. This processing option is used only for report display purpose, and amounts are not rounded in the FASB 13 Lease Control table
(Release 9.2 Update) The system determines which bill codes to include in straight-line rent processing. A processing option setting determines whether the R15130 retrieves the bill codes from the Bill Codes tab on the processing options, or from the Straight-line Rent Generation flag on the recurring billing records.
The system calculates the straight-line rent for the lease term.
The system compares the straight-line rent to the actual rent and calculates the difference (accrual or deferral) for each month for the lease term.
The system uses the setting of the Process Mode processing option to determine whether to print a report only, generate straight-line rent records, or delete straight-line rent records.
To review and revise straight-line rent information, you can use the Straight-line Rent Revisions program (P1513). This program enables users to:
Review all records that are marked for Straight-line Rent regeneration.
Update the Straight-line Rent Generation Control flag.
Processing option settings determine whether users have permission to perform this update.
Change the actual or straight-line rent amounts or adjustments.
Select records and perform a rollback to the previous generation of straight-line rent.
The system automatically revises the accrual or deferral amount, but these requirements must be met to prevent the system from generating an error:
The total of the amounts in the Actual Rent column must equal the total of the amounts in the Straight Rent column.
The total in the Accr/Defer column (the FASB effect) must be zero (blank).
If the system detects no errors after you revise information, it summarizes the annual amounts and recalculates the accruals, deferrals, and balance forward.
Another method to revise straight-line rent information is to change information on the recurring billing record or lease information record, and rerun the Straight-line Rent Generation program (R15130).
When the system generates the initial straight-line rent records, the Generation Control field (GENC) for the record is blank, which prevents the system from generating straight-line records again. When changes that you make to the lease information or recurring billings might impact straight-line calculations, you want to update the Generation Control field to Y, enabling you to recalculate new straight-line rent records.
If you revise a lease or recurring billing record after straight-line information has been generated, the system determines whether the change might impact those calculations, based on the fields that are updated. Depending on the processing option settings for the P1501 and P1502, the system does one of the following when such a change occurs:
The system saves the lease or recurring billing revisions and does not update the Straight-line Rent Generation Control field.
The user must manually update the Straight-line Rent Generation Control field before rerunning the R15130 in order to recalculate straight-line rent information for the revised lease.
A warning window appears to notify users that straight-line records might need to be recalculated.
The user can click OK to save the lease or billing revisions and mark the Straight-line Rent Generation Control field for all updated records. Alternatively, the user can click Cancel to save the revisions without updating the Straight-line Rent Generation Control field.
The system saves the billing revisions and automatically updates the Straight-line Rent Generation Control field.
Changing any field on the Lease Straight-line Rent Setup program (P15131) will update the Straight-line Rent Generation Control field. This table lists the additional fields that, when changed, could impact previously generated straight-line rent calculations:
|Lease Revision Fields||Recurring Billing Revision Fields|
|Lease Start Date
Lease End Date
Term of Lease
Commitment Beginning Date.
Straight-line Rent Generation option
In the event that a lease is terminated early by changing any of the above listed fields on the lease, you can regenerate straight-line rent calculations for that lease. When you run the R15130 again over the lease, the system performs a validation on the As of Date in relation to the lease end date, which is determined based on the processing option settings.
If the As of Date is after the lease end date, the system determines whether there are any Straight-line Rent records (F1513B) that have been processed into recurring billing by reviewing F1513B records for the lease/building/unit that have a Y in the PSFT field. The PSFT field is set to Y when the Straight-line Rent Recurring Billing Update (R15132) is ran. If processed records were found, the system considers this an early termination, and sets the As of Date to the first day of the final period for the lease. If no processed records were found in the F1513B, you will get an error indicating that the As of Date is after the lease end date.
Another method to revise straight-line rent information is to delete the active straight-line rent records and roll back to the previously generated records.
If you discover that straight-line records were generated using the wrong data selection or processing option settings, or that you have to revise a recurring billing record, you can delete all or part of the active batch of straight-line records and reactivate the previous records. Then you can make the changes and regenerate the correct records.
To delete and roll back the calculations, you must set the Process Mode processing option to 2 (roll back to previous generation) in the Straight-line Rent Generation program (R15130), and specify the batch number assigned to the straight-line records in the corresponding processing option. You can use data selection to limit the records that are deleted, if desired. When you run the program with the processing options set to roll back, the system deletes the active FASB records and reassigns the batch number to the previous records.
For example, after you run the R15130 program twice, the records appear as follows in the Straight-line Rent Lease Control table (F1513B):
|Lease||Building||Unit||Century||Year||Batch Number||Generation Code||Actual Rent Period 1|
After you run Straight-line Rent Generation (R15130) to roll back the records to the previous batch, the system deletes the active records and updates the records for the previous calculations as follows:
|Lease||Building||Unit||Century||Year||Batch Number||Generation Code||Actual Rent Period 1|
The system updates the Generation Code field to Y so that you can rerun straight-line rent calculations.
Note:The system retains only two batches in the Straight-line Rent Lease Control table (F1513B); therefore, you cannot roll back a specific batch more than once.
From the Straight-line Rent Inquiry form, you can review the current and previous generation of straight-line rent information. If you want to roll back to the previous generation of straight-line rent, you can select a record and then select Rollback from the Row menu. When you select this option for a record that does have a previous generation, the system performs the following tasks:
The system deletes all records from the F1513B that have the same lease number, building, unit, and batch number as the selected record.
The system then updates the previous generation records in the F1513B with the batch number that was on the selected record.
The system updates the GC (Generation Control) field for the updated records (previous generation) with Y so that they will be picked up for recalculation when the R15130 is processed.
If you select a record that does not have a previous generation, or you select a record that does not have a batch number, the system deletes all records from the F1513B that have the same lease number, building, unit, and batch number as the selected record.
In some situations, you might find it necessary to terminate a lease on a date earlier than originally planned. In these situations, it is likely that you have already generated straight-line rent information using the original lease end date. When the lease is terminated early, you must regenerate straight-line rent information.
When you change the lease term, the system marks the records for straight-line rent regeneration. When you rerun the R15130 to regenerate the information, if the As Of Date is later than the lease ending date, which is likely in an early termination scenario, the system changes the As Of Date to the first day of the previous period, and regenerates straight-line rent records using that date.
For example, if you ran the R15130 using the As Of Date of June 1, 2017, and the lease term ended on May 31, 2017, the system would change the As Of Date to be May 1, 2017, and regenerate straight-line rent records through the month of May.
Note:If you receive an error indicating that the As Of Date is after the lease ending date, there were either no existing straight-line records or the straight-line records were never processed into recurring billing. If this occurs, change the As Of Date to be prior to or equal to the lease beginning date.
From the Straight-line Rent menu (G1528), select Straight-line Rent Revisions.
On the Straight-line Rent Inquiry form, you can enter optional search criteria in the header or QBE line, and then click Search. Entering search criteria is not required.
Select the Display Previous Generation option to view records for previous generations of straight-line rent information. Records for the previous generation, if they exist, will not include a batch number.
To view all records that are currently marked for Straight-line Rent regeneration, enter a Y in the GC (Generation Control) column of the QBE line, and then click Search.
To roll back to a previous generation, select a record and then select Rollback from the Row menu.
On the Rollback Confirmation form, click OK. The system returns you to the Straight-line Rent Inquiry form. The record you selected has been deleted. To see the additional changes, click Search.
To revise the GC value for a record, select the row, and then select Update Gen Control from the Row menu.
On the Update Generation Control window, select or deselect the Generation Control option, and then click OK. The system returns you to the Straight-line Rent Inquiry form, and displays the new value for the GC field in the grid.
The Update Gen Control row menu option is available only if the processing option settings allow updates to the Generation Control field.
To view the lease details for a specific record, select the record and then select Lease Master from the Row menu.
Note that when you access the lease master from this row exit, the system populates the Building and Display All Versions fields in the header, and the Lease and Unit fields in the QBE line, using data from the record you select on the Straight-line Rent Inquiry form. You must update these fields if you want to change the search criteria on the Work With Leases form.
From the Straight-line Rent Inquiry form, to revise a record, select the record and then click Select.
The system displays the Straight-line Rent by Year form, which is read-only. Records are displayed by year, and the GC flag is selected if any records for that year are marked for Straight-line Rent regeneration. To revise information, select a record and then click Select.
Note that it does not matter which year you select on this form. The system will display all records on the next form. To skip the Straight-line Rent by Year form, you can select Straight-line Rent Revisions from the Row menu.
On the Straight-line Rent Revisions form, review and update any of these fields:
Enter the amount that is billed or amortized for the period specified.
Enter the average monthly rent amount that the system calculates when straight-line rent information is generated for the period specified. The system calculates the average monthly rent through the lease effective period based on the actual amounts.
For example, if the lease starts on January 1, 2007 and ends on December 31, 2008, and the rent is 1000 per month for 2007 and 1200 per month for 2008, the system calculates the straight-line rent as 1100 per month ([1000 × 12 + 1200 × 12) ÷ 24 = 1100).
Displays a value that represents the accrual or deferral amount as a result of straight-line rent calculations. The system subtracts the amount in the Straight Rent field from the amount in the Actual Rent field to calculate the accrual or deferral amount. If the number is positive, it represents the accrual amount. If the number is negative, it represents the deferral amount.
Displays a value that represents the FASB adjustment amount for the specified period. The system includes catch-up amounts and the amounts adjusted from converted FASB records.
You can update this field if you want to change the Generation Control flag for all records that match the criteria in the header of the form. This field is enabled only if the processing option settings allow users to update the Generation Control field.
After you generate the straight-line rent information, you must update the effects of straight-line processing to recurring billings. You run the Straight-line Rent R.B. Update program (R15132) to automatically create the bill code lines for accrued rent, deferred rent, and adjustments in the Recurring Billings Master table (F1502B). The system uses this information to update the recurring billing cycle and to create the appropriate straight-line rent adjustment billings.
Before running this program, review and update the processing options as necessary. To access this program, Select Straight-line Rent R.B. Update from the Straight-line Rent menu (G1528).
Use the Batch Selection processing option to specify whether the system updates the F1502B table for the entire batch of straight-line rent information or only the records that you specify in the data selection.
(Release 9.2 Update) The R15132 has been updated to include processing options that enable users to define the lease version and the Straight-line Rent Begin Date that is used when running the R15132.
After you generate the straight-line rent recurring billing records, you can review them using the Recurring Billing Information program (P1502).
This table describes the tasks to perform after you update recurring billings with straight-line rent information to complete the straight-line billing process:
|Generate the billing edit register (Required)||After you generate recurring billings for straight-line rent, you must run version XJDE0001 of the Billing Edit/Register program (R15300) to validate the transactions in the batch and to change the batch status.|
|Review the recurring billing journal||You can review, revise, and delete the batch of recurring billing records as necessary before you post them.|
|Post invoices and vouchers (Required)||After you generate the billing edit register, you must post the straight-line rent transactions to generate the invoice or voucher records.|
|Review straight-line rent billings transactions||You can review straight-line rent billing transactions in detail using the Billings Transaction Inquiry program (P15211).|