Intro to Course

Welcome to Non-Continuous Lease Terms and Fund Accounting Training with VLU. This course is designed to give you a better understanding of the accounting treatment for non-continuous (or seasonal) use of an asset, as well as Fund Accounting methods in the VL Platform.

By the end of this course, you should be able to:

• Set up an asset for non-continuous lease terms
• How to correctly edit the template to account for non-continuous lease terms
• How to include Fund Accounting into journal entries if you are a GASB client.

Please Take a moment to review the agenda. If you are looking for a specific topic, feel free to jump to the corresponding timestamp.

Non-Continuous Lease Terms

In this video, we will discuss the treatment of the schedule upload for the rare instance where a non-continuous lease term is required.

It is important to note, the most common type of non-continuous lease term is a seasonal rental, though this process can apply to any non-continuous term.

With seasonal rentals, there is a minimum guaranteed rent, but only while the property is made available .

So how does one account for that? To answer this question, let’s walk through an example.

Here is a seasonal rental lease we created. On the general tab, we created this lease for five SEASONS, which starts on November 1st, and ends on March 30th, which ends up being 5 in-season months every year, for a total of 25 months after the commencement of the lease

On the entries page, it was determined that it was going to be rented, in season, for $2000 a month, which would be the guaranteed rent. There may be a percentage on top of that while it is occupied, but remember that’s considered a variable payment and is therefore not used in our lease accounting schedule. We’re going to start here by entering the payments as continuous for 25 months, disregarding the irregular nature of the actual periods.

Next, create a new calculation and set it to active. The next step is important. Check the box “Use Schedule Upload”. Once complete, move through the wizard as normal until step 6 is reached. On step six, there will be a spot to upload the schedule as well as download the template. For this case, we’re going to download the template.

A popup window will display. Make sure to check the box “Schedule Information Populated”, then click here to download.

Once the template is downloaded, it is important to cancel the calculation. We will be doing another one with an edited template to account for the offseason periods.

Opening the schedule, we will need to modify it in order to reflect those off-season periods.

Please note, depending on the lease, some columns may not require data and can be left blank.

Enter the appropriate dates in the column if they did not export automatically. (18:35). Enter the additional months to the template to ensure the schedule foes to the actual lease expiration.

Next, find where the dead, or off-season, periods are and remove the data from the rows. The quickest way to accomplish this is to cut the information in the off-season periods, and paste them at the beginning of the in-season period for the duration of the lease. So it will look something like this <Show image>.

Repeat these steps until you reach the end of the term.

Once complete, you will see that there are gaps with no data in the off-season periods.

Please note: Any column that contains data during live periods must either have the balance brought forward or as zeros. The following example is to give you an understanding of the process of editing the template.

We will need to account for this by filling in information for balance sheet columns and placing zeros in the columns that deal with income, such as lease payment seen here.

Why zeros? Because there are no cash payments being made during those off-period months.
To complete the rest of the schedule for the off-season you will need to do the following:

1. In the columns for Lease Payment, Straight-Line E Expense, deferred rent and deferred running balance and amortization (calculation), enter zero dollars, since as mentioned a moment ago, there is no payments received during the off-period months.
2. The balance sheet items will need to be treated differently. We will need to take the balance on the account at the end of the in-season period and bring them forward with the same values for the off-season period.
a. To complete this, take the numbers from the last month during the in-season for Accumulated Amortization. Right of Use Asset. Gross Liability, and copy the data into the blank off-season months.
b. Now you can see for example, that the ROU Asset holds until payments begin again in the next in-season period (image 22:07)
c. Repeat this process for the liability schedules at the end of the spreadsheet (Image 22:15)

Once the changes to the schedule are made, save the schedule and close it. Then you can create a new calculation and schedule where we can upload the template on Step 6 in the wizard, the same spot we downloaded the template from.

The final step is you must first go back to the financial entries. Remember we had set the payments up for 25 consecutive periods. We must change that to reflect the actual timing of the payments. Therre are two ways you can do this.

You can modify the existing payment line by first changing the END DATE of the entry to be the lease expiration date, or if you leave it blank, the entry will assume the expiration date on the General tab. Then use the Planned Increases section to reset the amount to zero or regular payments on the appropriate dates. Be sure to save each increase, then save the entire entry.

Alternatively, you can create a separate line for each in-season period. The choice is yours; the platform can accept either method.

Fund Accounting for GASB 87 & 96

In this video we discuss what a fund is and the type of accounting treatment for the more typical entities of GASB 87 and GASB 96.
Please note, the following are examples of the many variations of Funds. Recognizing that there are many ways Funds to be recorded, the VL platform provides a simple way to account for them in the Journal Entries with interest and principle only.

A fund is like an accounting entity, similar to a subsidiary, which will have its own set of financial statements.

An example of entities that may use fund accounting can be a hospital or a school. However they are typically government entities.

While there are various fund types out there, we will discuss two common types of funds. The first is a general fund which will use a Modified Accrual basis. The second is a capital project will use a full basis accrual.

Before we move into the examples it is important to understand the difference between a Full Accrual Basis and Modified Basis since there are some differences.

Full accrual is when the revenue recorded is measurable and the expense is recognized when it occurs, or when the service was used. These tend to be companies that are for-profit. For example, when a company knows they will be paid at a later point, they can start recording that revenue. An example for expenses is when a company sends an invoice for a service rendered, even if it is a NET 30, the company will have to record that expense when service was completed, not when the invoice is due. In some instances, the company will need to estimate the expenses when services are rendered

Modified basis is when revenues are recorded when they are available, and expenditures are recorded when the fund liabilities are incurred or the assets are expended. These tend to be government entities and non-profits that are more focused on budgets. For example a company will be receiving a grant. When it is ready to be received, they will record the revenue, or in the opposite manner, the company will record the expense when they have incurred the expense. they are ready to pay.

Since a fund is a separate entity, they will have specific accounts related to the funds that don’t relate to the consolidated financial statements.

For example, if thinking about a government entity, when they go to report on their financial statements, they add all the funds together and create their comprehensive financial report.

The VL platform allows to record the funds as well as record the consolidated numbers.

Here you can see a sample journal entry. For GASB 87 journals, you can see this is a typical Journal Entry for the consolidated numbers. This Full Accrual side will show interest and amortization expense.

However when we show a Modified Accrual journal entry for a Fund, it will show the capital outlay, and will not show the amortization information but will display interest and principle.

There will still need to be some manual adjustments. For example, the AP Cash Fund is on both consolidated and Fund Journal entries and will need to be adjusted accordingly.

Creating these journal entries is easy. First, navigate to the lease accounting page and create a new calculation for GASB 87.

On step 2 there will be a checkbox for Fund Journal Entries. If left unchecked, the entries will only include the consolidated information. However, by checking this box, the Fund Journals (also known as modified accruals), will be included. After checking the box, continue through the rest of the wizard as normal. (34:16 image of checkbox)

After completing the wizard, scroll down to the journal entries and take a look at the first month. From here to here will be the standard consolidated GASB 87 journal entries.

The rest of the entries are for the fund including the Capital Overlay.

In the second month it will look a little different. All that is really needed is the interest and principal deduction from the liability which offsets the AP Cash fund.

Key Takeaways

This concludes our video on Non-Continuous Payments and Fund Accounting.

Remember…

• For seasonal payments it is important to properly edit the template before uploading it to the VL Platform.
• Payments should be zero during the off-season
• To view Fund Accounts, make sure to check the box in the wizard in order to include them in the journal entries.
• The information given for fund accounts is only the overlay, interest, and principle deductions.Thanks for watching. Any questions, suggestions, or feedback can be sent to support@visuallease.com