How to handle no interest with first payment in Lease Accounting?

Summary:

The requirement is to configure a lease with payments made in advance (on the first day of each month). In this scenario, no interest expense should be recognized in the first period, as the payment is made at the beginning of the lease term.

However, the system is currently calculating interest for the first period as well. The expected behavior is that interest should be recognized from the second period onwards only.

Content (please ensure you mask any confidential information):

• Lease start date: 1 January 2025
  
• Monthly payment: $1,000 (paid in advance)
  
• Lease term: 12 months
  
• Opening lease liability: $12,000

In this scenario:

• The first payment is made on 1 January 2025, reducing the liability to $11,000.