What's the Accounting Logic when Exercising a Renewal Option on a Lease?
Summary:
What's the Accounting Logic when Exercising a Renewal Option on a Lease?
Content (please ensure you mask any confidential information):
After exercising a Renewal option on a lease and run the Create Accounting process, two accounting events are generated:
- Lease Termination
- Lease Revision
Can anyone clarify the accounting logic behind these two events? Specifically, why is a Lease Termination triggered along with the Revision, and how are the Right-of-Use (ROU) asset and liability balances treated in this scenario?
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