Operating and Finance Lease functionality in nettTracker

Lease accounting has become increasingly complex as accounting standards require most operating and finance leases to be recognised on the balance sheet through a lease liability and a corresponding Right of Use (ROU) asset. The challenge for many accountants is ensuring these calculations remain accurate while complying with standards such as FRS 102, IFRS 16 and ASC 842.

This article explains how nettTracker's lease functionality automates the accounting for both finance and operating leases. The software calculates lease liabilities, Right of Use assets, depreciation and interest charges, while generating the appropriate accounting journals based on the selected lease type. For operating leases, it also creates a bespoke depreciation schedule that produces the required straight-line lease expense throughout the lease term.

The article also addresses the practical challenge of introducing existing leases into a system when the current asset value is unknown. Instead of requiring an asset valuation, users can estimate an effective borrowing rate to calculate the Right of Use asset and lease liability automatically. By automating these calculations and monthly journal entries, firms can improve reporting accuracy, reduce manual effort and simplify ongoing lease accounting.

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