RE-FX Advanced payments with IFRS16

[former_member1356917]

Hi all.

I need to fix an issue with the RoU generated in a contract. Currently we have a contract with a notice rule in september, so, in valuation, RoU was created until september (9 months). But with this contract, you make an advanced payment for the full year, 12 months, so the transitory account is not balanced. From accounting they told us that the RoU should be created for 12 months because that is the amount we have paid; but valuation is until september, that is when one of the parts can make effective the end of the contract. Next valuation will start on 1st of january of 2021.

How can I reflect that RoU for those cases where my payment is taking more months than my valuation?

BR.

[former_member581851]

In IFRS16, any balance of advance rent or balance of any prepaid rent is considered part of the initial cost of the ROU asset. If you are running the monthly accrual/deferral transaction in RE-FX, then the system will automatically determine the prepayment balance and recognize it as part of the initial cost of the ROU asset. You have to make sure you configure the account determination correctly in order to close them out properly.

Effectively, the entry will be at the initial recognition of the asset and lease liability:

Debit - ROU Asset (NPV + Prepaid rent balance) XXX,XXX

Credit - Lease Asset Clearing (NPV) XXX,XXX

Credit - Lease Cash Clearing (Prepaid rent balance) XXX,XXX

Debit - Lease Asset Clearing (NPV)

Credit - Lease Liability (NPV)

Next RERAPP:

Debit - Lease Cash Clearing (Prepaid rent balance) XXX,XXX

Credit - Rent Expense XXX,XXX

Next RERAALCN:

Debit - Rent Expense XXX,XXX

Credit - Prepaid Rent

[former_member765296]

Hi Fernando

I am curious to know how you were able to post RERAALCN for a condition that has been included in the valuation cash flow.

When I attempt to post RERAALCN for advanced payments, it only defers the conditions not included in my valuation parameter?

example:

RERAPP

Dr. Basic rent 5,000 (Also included in valuation rule)

Dr. Ops cost 2,500 (not included in valuation rule)

Cr. Vendor

RERAALCN (Inception)

Cr. Adnvance payment adjustment/Basic Rent (I/S)

Dr. Prepayment (B/S account)