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The Leases Data template is where you record the terms of each lease and work out the right-of-use asset and lease liability that need to go on the balance sheet. Enter one set of details per lease (dates, discount rate, payment schedule) and the template calculates the present value of the payments for you, or lets you key in a value you have already worked out elsewhere. Those figures then flow through automatically to the ROU assets template and the Lease liabilities template, so this is the first of the three lease templates you should complete.

Table of contents 

When should I use this template?

Use this template whenever the entity has entered into a lease that needs to be recognised on the balance sheet under the current lease accounting rules, for example a property lease, a lease of machinery, or a vehicle lease.

You do not need to use it for a lease that has been assessed as, and elected to be treated as, a short-term or low-value lease, because those can continue to be expensed on a straight-line basis rather than capitalised.

Before you start

Before entering a lease, have the following to hand:

  • the lease agreement or contract, so you can confirm the commencement date, end date and payment terms;
  • the discount rate to be applied, ideally the rate implicit in the lease, or otherwise the entity's incremental or obtainable borrowing rate;
  • a note of any one-off payments connected with the lease, such as costs paid before the lease started, initial direct costs, lease incentives, or a purchase or termination option.

To have this template's results picked up elsewhere, you need to add both the ROU assets and Lease liabilities templates to the workflow and star them.

Background

Under current lease accounting rules for lessees, most leases are brought onto the balance sheet: the lessee recognises a right-of-use asset (representing the right to use the leased item for the lease term) and a matching lease liability (representing the obligation to make the lease payments). The lease liability is measured at the present value of the future lease payments, discounted using the interest rate implicit in the lease where that can be readily determined, or otherwise the lessee's incremental or obtainable borrowing rate. The right-of-use asset is initially measured at the same amount as the liability, adjusted for any payments made before the lease started, initial direct costs, and similar adjustments.

Two recognition exemptions exist: short-term leases (12 months or less at commencement, with no purchase option) and leases of low-value underlying assets. Electing either exemption means the lease can continue to be expensed rather than capitalised. The short-term election is made by class of underlying asset; the low-value election can be made lease by lease. The template flags this election to you automatically where relevant (see Step 2 below), but the decision to apply an exemption, and the resulting accounting, sits outside this template.

Step 1: Add a lease and name it

Each lease you add appears as a new row in the summary table at the top of the template and a new section further down the page. Give the lease a short, recognisable name (for example, the address of the property or the registration of the vehicle). This name is used throughout the template and is shown in the ROU assets and Lease liabilities templates too.

Step 2: Enter the lease details

For each lease, complete:

  • Asset class: choose Land & buildings, Plant & machinery, or Motor vehicles. This determines which category the lease is grouped into in the ROU assets template and which default account range is used there.
  • Lease documents: attach the signed lease agreement or supporting paperwork.
  • Commencement date: the date the lessee obtains the right to use the asset, including any rent-free period.
  • End date: the contractual end of the lease term, including any extension or termination options that are reasonably certain to be exercised.
  • Discount rate: enter the annual rate to be applied, and select whether it is the obtainable borrowing rate, the incremental borrowing rate, or the rate implicit in the lease.

If the gap between the commencement date and the end date works out at less than a year, the template displays a warning reminding you that a short-term lease election may be available and how it can be applied (by class of asset for short-term leases, lease by lease for low-value leases). This is a prompt to review the election, not an automatic exclusion from the template.

Step 3: Record key lease information (optional)

Underneath the lease details you can record supporting narrative for the working papers: a summary of the terms of the lease, and, if you tick the relevant box, free-text space for judgements made in arriving at the accounting treatment, restrictions and covenants attached to the lease, and details of any remeasurement made and the reasoning behind it. These notes are for documentation purposes only, so they do not feed into the accounts, but they are useful for anyone reviewing the file later.

Step 4: Choose how to calculate the right-of-use values

Select one of two options:

  • Use the ROU values calculator: you enter the payments due under the lease and Silverfin calculates the present value for you.
  • Enter ROU values manually: use this if you have already worked out the right-of-use asset and liability values outside Silverfin and just want to record them.

If you use the calculator

Choose whether payments are a repeating payment (the same amount recurring throughout the lease) or custom payments (payments that change during the lease term), and select the payment frequency (monthly, quarterly or yearly).

  • For a repeating payment, enter the start and end dates for the payments and the amount per period. The number of payments implied by those dates is displayed so you can sanity-check it.
  • For custom payments, add a row for each period of payments (start date, end date, amount). Each row defaults to starting the day after the previous row ends.

Tick "Also include other payments and adjustments" to record one-off amounts connected with the lease: initial direct costs, lease incentives, the exercise price of a purchase option, an asset retirement obligation, residual value guarantees, termination penalties, or other one-off transactions. For each one you enter a date, amount, type and optional comments and attachment. Costs paid on or before commencement are treated as payments made before commencement (added straight to the right-of-use asset); most other types dated after commencement are discounted into the present value calculation. A warning is shown if a type that can only apply after commencement (such as a purchase option or termination penalty) is dated on or before commencement, because that combination is not valid.

The template discounts all payments at the monthly equivalent of the annual discount rate you entered and builds up the present value automatically.

Because the calculation works in whole monthly periods, it needs a rule for which period a date falls into when that date is not the 1st of the month. It applies a mid-month cut-off: a date on or before the 15th of a month is treated as falling at the start of that month (an "in advance" basis, so it is not pushed into an extra month of discounting), while a date from the 16th onwards is treated as falling at the start of the following month instead (an "in arrears" basis, so it picks up one extra month of discounting). This cut-off is applied consistently to both the lease's commencement date and to each payment's start date, so it is the relative position of the two dates around the 15th and 16th that determines how many monthly discount periods apart they are treated as being, not just the calendar month each falls in.

If you enter values manually

Enter the amounts directly into the ROU values table described in Step 5.

Step 5: Review the ROU values table

Once a calculation method is selected and there are values to show, a table appears with up to four lines: the present value of future lease payments, payments made on or before commencement, other direct costs, and other adjustments. For the calculator method these populate automatically from your inputs in Step 4, though you can still attach supporting files against each line. For the manual method you type the asset-side figure directly into each line. The liability shown against the present-value line is always the mirror image of the asset value calculated for that line. The total row gives you the right-of-use asset and lease liability for that lease.

Step 6: Post the recognition journal (optional)

Tick "Show ROU recognition journal" to see a suggested double entry recognising the right-of-use asset (debit) and lease liability (credit) calculated above, and to post it as an adjustment. If the trial balance does not yet have an account mapped for the asset class or for lease liabilities, the journal tells you which default account code to select. Where the asset and liability values are not exactly equal and opposite (for example because of payments made before commencement), the journal includes a balancing line for you to allocate.

What flows through to the rest of the accounts/workflow?

Each lease's calculated present value, right-of-use asset, right-of-use liability and lease term feed automatically into the ROU assets template (which depreciates the right-of-use asset) and the Lease liabilities template (which unwinds the liability and splits it between amounts due within one year and after one year). Once both of those templates are added to the workflow and starred, a "Next steps" link appears at the bottom of each lease's calculation letting you jump straight to them.

What rolls forward next year?

The lease details you enter here (name, asset class, dates, discount rate, payment schedule) are entered once and simply carry forward as they are, so there is no need to re-enter them each period. The calculated present value, right-of-use asset and liability, and lease term recalculate automatically based on those stored details and the current period end date.

You only need to come back to this template to add a new lease, record a change to an existing lease (a remeasurement or modification), or update the key lease information notes.

Where the data comes from

All of the figures in this template come from what you enter here: the lease terms, discount rate and payment schedule. It does not pull anything from the trial balance itself. Instead, its calculated results are the source of the figures that the ROU assets template and the Lease liabilities template reconcile back to the trial balance.

Frequently asked questions

Do I need to use the ROU assets and Lease liabilities templates as well?

Not necessarily to use this template, but its calculated values only appear elsewhere in the accounts once those two templates are added to the workflow and starred, so in practice you will need all three.

What if I already have a right-of-use asset and liability calculated in a spreadsheet?

Choose "Enter ROU values manually" and enter your calculated figures directly into the ROU values table.

Why is there a warning about short-term leases?

It appears when the gap between the commencement date and end date is less than a year, to remind you that a short-term lease exemption may be available. Deciding whether to apply the exemption is a judgement for you to make; the template does not apply it automatically.

Can I attach the lease document?

Yes. There is a file attachment field against the lease details, and further attachment fields against each line of the ROU values table if you want to support individual figures with separate documents.