Lease accounting for lessors inside NetSuite | NetLessor overview

This is a Net Lessor product overview, our suite app for Lessor's perspective. So I've navigated to my NetSuite screen here. As you can see, I've got a drop down for Net Lessor, which is what we're going to walk through today. You can also see the drop downs for our other products up here as well. I have navigated here to a lease that I want to walk through. This lease is set up as a sales type lease. As you can see, we've got our key primary information at the top. We've got our schedule information here in the center. Now the schedule information is really the core of how we set up our lease and what determines how this lease is going to be accounted for. So Netlistor will actually help you calculate or determine what your lease classification should be. Now, lease classification can be operating sales type or direct financing under US gaap. And that determination is made based off of the information right here. So what I've entered in is our commencement date, our useful or our useful life of the leased asset, our lease term, the amount of the monthly payment, which we can enter in variable payments as we go along if we like. In this case, this lease is the same $4,000 a month for the entire life of the lease. We have a calculated implicit rate in the lease, which is basically the present value of all the lease payments relative to the initial fair value or sales price of the asset. We have our lease asset carrying costs, which is our inventory value of this asset. And then we have on this tab we have all of our payment information throughout the life of the lease. You can see here on our amortization schedule that we have an initial net investment lease of $250,000. Our monthly payment here, our amount of monthly lease interest income, and then this allocated to nil is the amount of the principal pay down of our lease receivable. As you can see, I've already gone ahead and recorded some journal entries. I'll click into those here in a second and show you exactly what those look like. The way we run journal entries is just through this button right here. Or we can navigate to that through process monthly lease journals page right here to process all of our transactions for all of our leases. Let's just look into these first two entries and see what these look like. This is our initial balance entry. We are establishing our net investment in lease. We are basically removing our inventory value of that asset and then we're recording our $25,000 in selling profit. We also are able to gross up the revenue to the full 250 and record cost of goods sold for 225 if we would like. That's just available in our system settings page. Got our lease receivable clearing account right here. This is for the total amount of payment which includes the 4,000 of the base rent and 250 of our maintenance revenue, which I'll show you here in a second. Then we have the interest and the reduction in our net investment and lease. These amounts are 100% based off of the schedules here. So there's no surprises in what's going to come in those journal entries. The other thing I wanted to highlight here is on our payments and invoices tab, we are able to specify any non lease payments. So on this particular lease we've got additional charges for maintenance of this asset that we perform. And so we've got an additional $250 of revenue. However, that is not included in the lease itself. So we call this here a non lease payment. And then that gets reflected on the invoice here as well. I just wanted to highlight that we have the ability to generate invoices directly from netless or based on these payments here that we're seeing on screen. So I can come in here and click on one of these invoices and it's going to show me exactly those two payments. Right here we've got this $4,000amount and this $250amount. This invoice can be sent over directly to the customer or used to accept payment. Okay, let's navigate back to our lease here. A couple of things that we can do. We can do a lease modification or we can early terminate a lease if we need to do that. Let's go ahead and look at a lease modification. On this lease modification we've got a standard lease modification or what we call a non lease payment lease modification. The non lease payment lease modification is simply going to allow us to adjust our non lease payments, our maintenance costs or other non lease payments if those are changing, but doesn't allow us to update our core base rent. The standard modification allows us to adjust our base rent amount, any of the other terms of our lease up here. In this case, we're going to extend our lease out another six months. So we'll update this to 72. This is going to auto recalculate. We're going to go ahead and determine lease classification and then go ahead and modify the lease. Okay. As you can see, our lease modification is now complete. Our lease now has additional lines to go out those additional six months. And we also have the option to reverse that modification if for some reason we entered it incorrectly. One last thing I want to highlight here before we finish is probably my favorite report here. We've got similar reports for lease revenue, but this is our lease payment waterfall. This will show us our cash flow from our leases over whatever period of time that we decide. We've got filters down here so we can filter for different accounting periods, different subsidiaries, departments, classes and locations. Each of these columns here represents a month. And we can see here on this lease we've got $10,000 up through December 2021, but nothing thereafter. But on this lease we've got 850 per month up through December 2021, but then we still have a $28,000 worth of payments after that. We have a bunch of other reports that can help you forecast your revenue. All of these reports are based off of the schedules that we generate when we create our lead. That's all I wanted to talk through today. Please reach out to our sales team if you have any additional questions. Thanks.