To watch a video series of how to onboard an agreement, refer here.

Where to start? You've got your first lease agreement, and you want to get your lease accounting numbers! We've designed Cradle to mirror the accounting steps as prescribed in IFRS 16 and ASC 842. 

Step 1) Select Agreements → + New Agreement

Step 2) Decide on your role in the lease agreement - lessee or lessor

Step 3) Decide on the classification of the lease, if applicable

If unsure of the classification select "Lease Classification Test"

*For IFRS 16, GASB 87 & 96 there is no lease classification

Once completed, you'll see the following screen:

Now you're ready to start entering a new agreement!
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Hint - most fields have a "?" if you're unsure what a field does, select the question mark, and it will provide greater detail of the purpose of the field. 

Basic Details 

These will be the first fields you fill out in Cradle. These are the general details about the agreement.

The user will note three accounting-related fields in this section:

The remaining fields are general details about the leased asset. 

All fields will have a direct impact on your numbers. The information entered in these fields will drive the calculation of the lease liability and right-of-use asset. 

Critical accounting judgments are:

For further information, refer to the "?" icon for each relevant field. Note the lease classification is not applicable for IFRS 16.

These inputs drive the fixed payments of the lease. 

The key here is for the user to identify:

The following fields found here have a direct impact on the measurement of your lease liability. For example, if you add a payment, that payment will be present value using the discount you entered in "Key Financial Inputs."

In Cradle's help material, there is more information on how to input this data. Search for each applicable input, e.g., Fixed increases, and you will find more detail.

These are inputs specific to the right of use asset. 

ROU End Date: Under the standard, the right of use asset and lease liability can have different end dates. If it's the same date as the lease liability, enter the same date. This field determines the right of use asset's depreciation/amortization end date.  

(For ASC 842, there is no right of use asset end date because it would be considered a finance lease)

Incentives Before Commencement: At initial recognition, an amount entered here is subtracted from the right of use asset.

Direct Costs: An amount entered here will be added to the right of use asset at initial recognition.

Prepaid Amount: This amount will be added to the right of use asset value.

Accrued Amount: This amount will be subtracted from the right of use asset value.

Deposits: This will create the journal entries applicable for a deposit. This amount will have no impact on the calculation of the lease liability.

Business combination gain/loss: If a positive number is entered in the field, it will be added to the use asset's right. A negative number will do the opposite. Therefore, this field should only be completed if the lease agreement was acquired through a business combination.

Business Combination Date: The date the business combination occurred. If this date is after the agreement start date, this is the date the IFRS 16 will be applied.

Asset Retirement Obligation (ASC 842) / Make Good Provision (IFRS 16): For IFRS, this amount will be added to the right of use asset. With ASC 842, the user can add the amount to the right of use asset or account for the provision separately.

Once you have filled out all your relevant fields, you're ready to calculate your lease agreement!

Hint: If you haven't filled out the mandatory fields, the minimal information to calculate a lease, you won't be able to create the agreement.