In this webinar Lease Query reviews a comprehensive example of how to apply the new lease accounting standard, ASC 842. The presentation reviews key lease dates and terms under the new standard and identify contract financial components and their applicability towards the lease liability calculation and determination of the appropriate discount rate. The presentation also covers journal entries under ASC 842.

1. RKL and LeaseQuery:
Applying the New Lease Guidance for ASC 842
JASON PARKER, CPA

2. Housekeeping Items
• This webinar will be recorded and made available at a later date.
• NASBA CPE Requirements: In order to receive CPE for this webinar:
o Participants must be connected to the session (both audio and presentation) for its
entirety.
o Participants must answer three questions/elements of engagement.
o One (1) hour of CPE in the field of Computer Software and Applications will be
granted if you meet these requirements
Prerequisites: None | Advanced Preparation: None | Program Level: Basic | Delivery Method: Group Internet-Based
For information regarding our complaint policy, contact RKL’s HR department at 717.394.5666.
RKL LLP is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional
education on the National Registry of CPE Sponsors. State boards of accountancy have the final authority on the acceptance of individual
courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its
website: www.nasbaregistry.org.

3. Jason Parker, CPA
Accounting Solutions Manager
Professional Background
● BA and MAcc in Accounting from UGA
● Former KPMG Auditor in the public, private,
and state government sectors
● Active CPA in the State of Georgia
jason.parker@leasequery.com
linkedin.com/in/jparker5/
PRESENTER
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4. RKL and LeaseQuery
Our Partnership
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5. Agenda
01 | Key Dates / Lease Term
02 | Lease Components
03 | Borrowing Rates
04 | Initial Journal Entries
05 | Subsequent Journal Entries
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6. Polling Question #1
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To be eligible for CPE, all polling questions must be
answered.

7. APPLYING THE NEW LEASE GUIDANCE: ASC 842
Key Dates / Lease Term
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8. Background
 Private Company
 Calendar Fiscal Year
 Transition Date: January 1,
2022
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9. Background
The tenant entered into an office lease agreement on October 24, 2020. The lease agreement stipulated
that commencing on January 1, 2022, the tenant would lease all of the office space on the 3rd, 4th, and
5th floors of a building, which was to be constructed and owned by the landlord.
Construction was completed ahead of schedule, and the landlord grants the tenant early access on
November 1, 2021.
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10. What is the Lease Commencement Date?
A) Lease Execution Date (October 24, 2020)
B) Early Access Date (November 1, 2021)
C) Contractual Lease Commencement Date (January 1, 2022)
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11. Background - Pt. 2
The contractual lease term is 108 months, which begins on the contractual lease commencement
date. Unless there is a material breach by the other party, neither the tenant or landlord can
terminate before the expiration of the contractual term.
The tenant has an option to extend the lease term for ten years for a price equal to the greater of
the following:
1) The FMV that other tenants are paying for similar space and terms, or
2) $13 / sq. ft.
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12. What is the Lease Term?
11/1/2021
Lease
Commencement
Date
1/1/2022
Contractual
Commencement
Date
12/31/2030
108 Months
Renewal
120 Months
Lease Term = 110 months
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13. Polling Question #2
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To be eligible for CPE, all polling questions must be
answered.

14. APPLYING THE NEW LEASE GUIDANCE: ASC 842
Lease Components
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15. Lease Components
The lessee makes a payment of $500K on October 24, 2020. This payment will reduce the first payment due under the lease
term.
Yes. Lease component - Prepaid Rent
Base rent payments of $500K commence on the contractual lease commencement date and increase by 3% every 12
months thereafter. The rent for each month is due on the first day of each month.
Yes. Lease component - Lease Payments
Tenant has right to use any 120 parking spaces in the garage of the building to be constructed. The total number of parking
spaces in the garage is 240.
No. Not a lease component.
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16. Lease Components - Pt. 2
Tenant will pay its proportional share of security, janitorial and landscaping services to the landlord. The amount paid
will vary each year depending on actual costs incurred by the landlord.
No. Variable Non-Lease Component
Tenant will pay $9.8M for tenant improvements owned by the tenant.
No. Capitalized Leasehold Improvement
Landlord will reimburse $2.3M of the $9.8M related to the tenant improvements owned by the tenant. The lessor pays
the $2.3M incentive to the lessee on the date of early access.
Yes. Reduction of initial asset value and periodic straight-line expense
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17. Lease Components - Pt. 3
On October 24, 2020, tenant made an additional payment of $2.5M to the landlord as a security deposit.
The security deposit will be returned upon lease termination.
No. Recorded as a Receivable
The lessor requires insurance payments on a bi-annual basis. The cost of the insurance to the lessee is
fixed in nature, as the lessor will bill the lessee $15K every six months. The insurance is for the benefit of
the lessor.
No. Fixed Non-Component
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18. APPLYING THE NEW LEASE GUIDANCE: ASC 842
Borrowing Rates
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19. Borrowing Rate
What discount rate would you use under:
A) Topic 840?
B) Topic 842?
A)
B)
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20. Polling Question #3
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To be eligible for CPE, all polling questions must be
answered.

21. APPLYING THE NEW LEASE GUIDANCE: ASC 842
Initial Journal Entries
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22. Liability Calculation
• Base Rent - $500K, increasing by 3% annually
• Fixed Insurance payments of $15K, payable every six months beginning June 1,
2022
• Borrowing Rate - 7.2%
Opening Lease Liability as of January 1, 2022 = ($44,100,433)
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23. ROU Asset Calculation
Opening Lease Liability ………………………………………………………………………………………………..$44,100,433
Cumulative Deferred Rent………………………………………………………………………………………………………….. (571,358)
Remaining Incentive Liability…………………………………………………………………………………………………….. (2,258,182)
Opening ROU Asset as of January 1, 2022 = $41,270,893
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24. What is the initial journal
entry at transition?

25. DR ROU Asset 41,270,893
DR Deferred Rent 571,358
DR Lease Incentive Liability 2,258,182
CR Lease Liability 44,100,433
Transition Journal Entry
January 1, 2022

26. What are the subsequent
journal entries?

27. Straight-Line Expense Calculation
October 2020 Prepayment………………………………………………………………………………………………. $500,000
November 2021 TIA
Reimbursement……………………………………………………………………………………………………………….(2,300,000)
Gross Base Rent Owed………………………………………………………………………………………………….. 60,454,637
Gross Insurance Pmts Owed………………………………………………………………………………………... 270,000
Amount to Expense……………………………………………………………………………………………………… $58,924,637
Number of Periods ………………………………………………………………………………………………………… 110
Straight-Line Expense= $535,679
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28. DR Lease Expense 535,679
DR CAM Expense* 10,000
DR Lease Liability 233,810
CR Cash 510,000
CR ROU Asset 269,489
*$10,000 in variable expense related to the
maintenance charge.
Subsequent Journal Entry
February 29, 2022

29. ASC 842 Amortization Schedule

30. Would you like to schedule a
demonstration of LeaseQuery?
Polling Question #4
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31. TAKEAWAYS
1 Understand the importance of each key date.
2 Determine the requirements to measure the appropriate accounting
lease term.
3
Identify the appropriate borrowing rate used to discount lease payments
based on the start date of the lease and whether the lease begins under ASC
840 or ASC 842 guidance requirements.
4 Calculate and post the ASC 842 financial statement impact to the GL.
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32. Additional Considerations for COVID-19
How to Account
for Partial Lease
Terminations
Potential Impairments
of Leased Assets and
the Right-of-Use Asset
Lease Abandonment
Accounting: Common
Questions and a Full
Example
COVID-19 Accounting
for Lease Concessions:
Full Explanation and
Example
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33. RKL Sage 100 Customer Account Managers
CONTACT INFO
Phone: 717-735-9109 x4327
Email: mlaudano@rklesolutions.com
MY FOCUS AND EXPERIENCE
Focused on relationship building and better
communications. To address software questions and
obstacles in order to better serve and provide the highest
level of customer satisfaction for our Sage 100 clients.
Michelle Laudano
Customer Success Manager
Sage 100 Central & Eastern
CONTACT INFO
Phone: 717-869-4333
Email: lpalladino@rklesolutions.com
MY FOCUS AND EXPERIENCE
Lindsey is the CSM at RKL eSolutions for our Sage 100
Western Region and Sage 300 clients, focused on
extraordinary customer care, licensing and add-on
solutions
Lindsay Palladino
Customer Success Manager
Sage 100 West and Sage 300

34. RKL Sage X3 & 500 Customer Account Managers
CONTACT INFO
Phone: 717-735-9131
Email: mshare@rklesolutions.com
MY FOCUS AND EXPERIENCE
Mike is the Customer Success Manager at RKLe
Solutions, focused on helping our Sage 500 and Sage
X3 customers with advice to save them time, money,
headaches and gain the most value from their
investment in Sage Software.
Mike Share
Customer Success Manager
Sage 500 and Sage X3 West
CONTACT INFO
Phone: 717-735-9109 x 1492
Email: glane@rklesolutions.com
MY FOCUS AND EXPERIENCE
Focused on growing the relationship with RKL
eSolutions clients and identifying software solutions to
meet clients’ needs.
Gia Lane
Customer Success Manager
Sage 500 and Sage X3 East

35. RKL Sage Intacct Customer Account Manager
CONTACT INFO
Phone: 717-735-9109 x 4381
Email: lgillett@rklesolutions.com
MY FOCUS AND EXPERIENCE
With 10+ years of customer account management, I help
clients get the most from their software and their
relationship with RKL
Lisa Gillett
Customer Success Manager

36. Thank you.
Jason Parker
Accounting Solutions Manager
jason.parker@leasequery.com
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