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Provision on leases

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edited Jan 6, 2022 8:42AM in Lease Accounting

Summary:

Is it possible to record a provision (e.g. onerous lease provision) against a lease ?

Content (required):

My organization has a requirement to record provisions against leases. Provisions are applied at the start of a lease, and increase/ decrease the RoU Asset by the value of the provisions. The expected results of the the provision are:

  1. journal entry to adjust the ROU asset: DR/CR Provision and CR/DR ROU Asset
  2. Amortization to be calculated based on the ROU Asset value (including provision)
  3. Utilization of the provision at the end of the lease term: DR P&L CR Provision

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