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Lease Accounting checklist
Lease Identification
Review new contracts to determine if they contain a lease under the applicable accounting standards.
Examine contract renewals and modifications to identify any changes that affect lease accounting.
Assess whether each component within a contract should be accounted for as a separate lease component.
Lease Classification
Classify each lease as either an operating lease or a finance lease based on criteria outlined in the accounting standards.
Determine the lease term by considering options to extend or terminate the lease.
Evaluate the economic life and fair value of the underlying asset to support lease classification.
Lease Measurement
Calculate the present value of lease payments using the appropriate discount rate.
Determine the lease liability and right-of-use asset to be recognized on the balance sheet.
Assess and calculate any initial direct costs to be included in the measurement of the right-of-use asset.
Lease Disclosure
Prepare disclosures that provide information about the amount, timing, and uncertainty of cash flows arising from leases.
Ensure that all lease-related assets and liabilities are properly disclosed on the balance sheet.
Update footnotes and MD&A sections of financial statements to include qualitative and quantitative information about leases.
Lease Reassessment and Modification
Reassess lease classification upon occurrence of a significant event or change in circumstances.
Review lease agreements for any modifications and analyze their impact on lease accounting.
Adjust lease measurements and related disclosures if there are changes in lease terms, discount rates, or lease assumptions.
Periodic Lease Reporting
Perform a periodic review and update of the lease portfolio for financial reporting purposes.
Ensure accuracy of lease-related entries in the general ledger and reconcile with lease schedules.
Generate standard and ad hoc reports for management and external stakeholders, such as lease commitment schedules.
