Refer to 1:57 of the video for an explanation on how to input lease incentives
** Please note if it's an incentive before commencement, it is input under the Right of Use Asset**
Lease incentives are used when the lessor grants the lessee a reduction to the fixed payment amount during the lease. The Initial Recognition tab is where most commonly, you will enter the lease incentives:
If an incentive occurs after the lease's commencement, it should be entered in the Modification tab.
When entering lease incentives, you should note:
You can enter the lease incentive amount either as a $ dollar or % percentage amount. For example, the fixed payment amount is $100 per month, and the lessor provides an incentive to reduce the fixed payment amount to $60. You can either enter $40 or 40%. The incentive is applied to the range covered and will pro-rata the payments accordingly.
If the lease incentive is only for a defined period and reverts to the original fixed payment, ensure to uncheck "No End Date."
With lease incentives, ensure the dates are entered correctly. For example, the lease commences on 2020-1-1 and expires on 2023-12-31, and there are two incentives. In January, there are no lease payments for the month. In February, the lessor provides a 40% discount on lease payments. You should enter the data like the following:
Payment Inputs and Incentives
A lease incentive is layered on top of the fixed and other payment amounts.
As a result, you don't need to edit the fixed payments for the incentive to work. For example, lets you input a $1,000 monthly payment:
Suppose you have an incentive in March with a $0 fixed payment. You do not edit the payment inputs. Just enter the incentive
Because of this there will be no payment in March.