Understanding Recurring Billing for Straight-line Rent (Release 9.2 Update)

If the rent increases or decreases over the term of the lease, you must enter accrual or deferral entries to accommodate the Straight-line Rent ruling, which states that revenue from rent (recurring billings) must be recognized evenly (as a straight line) over the life of the lease. For example, if a tenant's rent for a three-year lease is 1000 the first year, 1500 the second year, and 2000 the third year. Straight-line Rent requires a billing of 1500 each month for the life of the lease. You must enter or generate journal entries to account for the adjustments (500 for each month during the first year and −500 for each month during the third year).

The Straight-line Rent Generation program (R15130) calculates the adjustment amounts for you, and the Straight-line Rent R. B. Update program (R15132) generates the recurring billings for the adjustments.

If you do not use the Straight-line Rent programs to calculate and generate the adjustment billings, you must set up the bill codes for the adjustment amounts manually in recurring billings, or enter a journal entry each month for the adjustment.

Straight-line Rent Setup for Recurring Billing

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. A processing option on the P1501 controls whether you can update this field. The version of the P1501 that the system uses is defined in the processing options of the P1502 version that you are using.

You access straight-line rent setup information that is specific to your recurring billing records using the Straight-line Rent Setup form menu option on the Recurring Billing Revisions form.

Straight-line rent information is used by the Straight-line Rent Generation program (R15130) when generating straight-line rent information for a lease. A processing option on the R15130 determines whether the values on the Straight-line Rent setup, or the values in the R15130 processing options are used when calculating straight-line amounts.

See Setting Up Constants for more information about straight-line rent constants. See Generating Straight-line Rent Information for information about the R15130.

Specifying Bill Codes for Straight-line Rent Processing

You can view the Straight-line Rent Generation option for each recurring billing record you set up for a lease. The record retrieves the default value of the Straight-line Rent Generation field from the bill code setup. A processing option on the P1501 controls whether you can update this field. The version of the P1501 that the system uses is defined in the processing options of the P1502 that you are using.

Revising Recurring Billing Records After Straight-line Rent Information Has Been Generated

If you revise recurring billing records 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 P1502, the system does one of the following when such a change occurs:

The system saves the 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 in order to recalculate straight-line information for the revised lease.
A Straight-line Rent Warning window appears to notify users that straight-line rent records might need to be recalculated.
The user can click OK to save the billing revisions and mark the Straight-line Rent Generation Control field for all updated records. Alternatively, the user can click Cancel to save the billing 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.