Understanding Straight-line Rent Processing for Leases
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). Straight-line Rent, which is 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.
Straight-line Rent Setup for Leases (Release 9.2 Update)
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.
You access lease-specific straight-line rent setup information using the Straight-line Rent Setup form menu option on the Lease Master Revisions or the Recurring Billing Revisions forms using a Form menu option.
In some cases, there are multiple buildings on a single lease. To retrieve straight-line rent constant values, the system uses the first building on the lease to determine which default values to add to the lease.
For example, if you have constants defined for building 100 and building 200, and your lease includes both buildings, the system retrieves the default values from the constants using the first line of the lease. Those values are then used for all items on the lease.
You can use the Work With Straight-line Rent Lease Setup Program (P15131) to review, and if allowed, update the straight-line rent setup for a group of leases. The program allows you to use filter criteria to view all leases that have straight-line rent setup information, to view leases that do not have the setup, or to easily review the setup for all leases.
The processing options for the P15131 enable users to specify which version of the P1501 the system uses. The processing option settings on the specified version of the P1501 determine whether users are allowed to update straight-line rent information using the P15131, and also which lease version is currently active.
Straight-line rent information is used by the Straight-line Rent Generation program (R15130) when generating or regenerating straight-line rent information for a lease. A processing option on the R15130 determines whether the values on the lease, or the values in the R15130 processing options are used when calculating straight-line rent amounts.
See Setting Up Constants for more information about straight-line rent constants. See Generating Straight-line Rent Information for information about the R15130.
Straight-line Rent Generation Control (Release 9.2 Update)
After you create a lease, you might need to generate straight-line rent information for that lease. If you revise the lease after straight-line rent information has been generated, the system determines whether the change might impact straight-line calculations, based on the fields that are updated. Depending on the processing option settings for the P1501, the system does one of the following when such a change occurs:
The system saves the lease 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 warning window appears to notify users that straight-line rent records might need to be recalculated.
The user can click OK to save the lease revisions and mark the Straight-line Rent Generation Control field for all updated records. Alternatively, the user can click Cancel to save the lease revisions without updating the Straight-line Rent Generation Control field.
The system saves the lease revisions and automatically updates the Straight-line Rent Generation Control field.
You can access the Straight-line Rent Revisions program (P1513) directly from the Lease Master Revisions form using a Form menu option. The system uses the version of the P1513 that is specified on the Versions tab in the processing options of the P1501. For additional information about straight-line rent processing, see: Straight-line Rent Standards and Processes.