If you have any Perpetual leases in your portfolio, there are some specifics to keep in mind when recording these in Nomos One. This article will walk you through how to set up a Perpetual lease Agreement in Nomos One.
To calculate your balances for IFRS 16 accounting and, therefore, run IFRS 16 Reports, your Agreement needs to have an Expiry Date. We will explain your options for choosing an Expiry Date in this article.
Setting up a Perpetual Lease Agreement
When initially creating an Agreement that is a Perpetual lease, follow the standard Agreement creation process, until you get to the Events page. Please note that when you record your Perpetual lease in Nomos One, it needs to have an Expiry Date in order to report on it for IFRS 16.
- When entering a date in the Term End Date field, within the Initial Term and Renewals section, you may choose to enter either:
- A date that acts as a placeholder, such as end of the next financial year or forecasting period, at which point (if you are still in the Agreement), you can further extend the lease term to reflect the continuation of the lease, or
- A date on which you expect to exit the lease. While Perpetual leases are continuous in theory, you may realistically expect to stay in the lease for a certain amount of time
- Record any other Events relevant to your lease
- Continue the Agreement creation process as normal, including setting it up for IFRS 16 Reporting if required
Extending a Perpetual Lease Agreement
As you approach the Expiry date, you will need to either extend the Agreement, or if you are not continuing the lease, expire the Agreement as noted in the section below.
The process for extending a Perpetual lease Agreement to represent its continuation is the same as our lease term extension process for typical leases, which you can find here. When recording the extended term to reflect the perpetual nature of the lease, use the same process explained in step 1 in the above section to choose an end date for the extended term.
Please note: when extending your Perpetual lease Agreement, you will need to complete the process at least one (1) day before the Agreement is set to expire.
Exiting a Perpetual Lease Agreement
If you choose to exit the Perpetual Lease Agreement at an Expiry event you have already scheduled, all you'll need to do is complete the Expiry event.
If you choose to exit the Agreement earlier than the entered Expiry date, you can either:
- Surrender the Agreement. This choice would be suitable if the surrender is effective immediately.
- Decrease your Lease Term. This choice would be suitable if your confirmed expiry date is not effective immediately, but you need to reflect it in your financial reports nonetheless.
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