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Actual Cash-Out Doesn't Line Up With Lease Payment In Cradle
Actual Cash-Out Doesn't Line Up With Lease Payment In Cradle

The reconciliation between the lease payment amount in Cradle and the actual cash payment is done outside of Cradle

Samson Wai avatar
Written by Samson Wai
Updated over 10 months ago

Overview

  • A common situation is that the lease payment amount in Cradle doesn't match the actual cash outflow.

  • The lease payments in Cradle should reflect the known future lease payments, as defined by the applicable accounting standard such as ASC 842 or IFRS 16, at a point in time, exclusive of taxes.

    • For the definition of lease payment under ASC 842, please refer here.

    • For the definition of lease payment under IFRS, please refer here.

  • If there is a difference between the actual cash outflow and the lease payment, the differing amount needs to be reconciled outside of Cradle

What Should I Do When the Actual Payment Doesn't Match the Lease Payment in Cradle?

  1. If the difference is expected, e.g., the total cash includes sales tax, the reconciliation will occur outside of Cradle in your applicable ERP.

  2. Ensure there are no mistakes in the recorded lease payment. If there are, determine if the change needs to occur in Cradle. You will need to update either the

    1. Initial Recognition: the known future lease payments at the commencement or transition of the lease. To learn more refer here.

    2. Modification tab: subsequent changes to the lease agreement. To learn more refer here.

FAQ:

  • Can I manually adjust the payment journal entry in Cradle to align with the actual cash payment? No, you cannot. Cradle is designed to generate the journal entry based on the data provided under Initial Recognition and Modification. If you need to update the payment journal entry, please adjust your ERP system.

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