Overview:
Lease incentives are reductions in fixed lease payments granted by the lessor.
If known at lease commencement or transition, incentives are included in the initial recognition.
If payment terms change later, incentives are recognized as part of the modification.
The video below shows how to enter lease incentives in Cradle for both initial recognition and modifications:
Length: 3 minutes
Alternatively, you can refer to the following steps:
How to enter lease incentives in Initial Recognition
When a lease incentive reduces payment amounts at lease commencement or transition, record it during Initial Recognition.
Note: If the incentive occurs before commencement, enter it under the Right-of-Use Asset section.
Step 1: Click on Agreements to select the agreement you want (see arrow 1), go to Initial Recognition (see arrow 2), and scroll down to the Lease Incentives section(see arrow 3).
Step 2: Enter the lease incentive inputs
Start Date and End Date
Adjustment Method (Dollar or Percentage) and its value
For example, to reduce a $100 payment to $60, enter $40 (dollar) or 40% (percentage). The system will apply that reduction over the specified period and prorate payments automatically.
Tip: If no payment is due for a period (e.g., one month free), select 100% adjustment to eliminate the full payment.
If the incentive is temporary (and payments should revert afterward), uncheck No End Date.
How to enter lease incentives in Modifications
When a agreed change reduces lease payments, record the incentive under Modifications.
Step 1: Open the lease, go to the Modifications tab (see arrow 1), click + Add New Modification(arrow 2), choose Incentive (arrow 3), and then click New Modification.
Step 2: Enter the modification inputs
Date Effective: The date the lessee and lessor agree to the change—and when the lease liability and ROU asset will be remeasured. For more information, see What Is the Date Effective.
Start Date and End Date
Adjustment Method (Dollar or Percentage) and its value
For example, to reduce a $100 payment to $60, enter $40 (dollar) or 40% (percentage). The system will apply that reduction over the specified period and prorate payments automatically.
Tip: If no payment is due for a period (e.g., one month free), select 100% adjustment to eliminate the full payment.
If the incentive is temporary (and payments should revert afterward), uncheck No End Date.
If the discount rate has changed, check Change Discount Rate.
FAQs:
My company received a reimbursement for leasehold improvements. How do I record the incentive? Only record the payment as a lease incentive in Cradle if it directly reduces future lease payments. If the reimbursement does not reduce lease payments, account for it outside of Cradle. For more details, see this help article.