The CPA Journal

By Howard D. Hendler

A powerful tool for SFAS 13 straight-line and future minimum rent calculations, the Lease Footnote Calculator is a Windows application designed specifically to determine rents on a straight-line basis and compute future minimum rents to comply with GAAP requirements under SFAS 13, Accounting for Leases. The program’s strengths include minimal data entry requirements; a full-featured, user-friendly interface; flexible and robust reporting; and a powerful and accurate processing engine.

Many organizations that need to calculate straight-line rents and disclose future minimum rents have little choice but to use home-grown spreadsheets for the task. While Microsoft Excel and other general purpose spreadsheets are capable of performing these calculations, significant resources must be dedicated to developing and testing the program, generating presentable reports, and handling period-ending rollover tasks. Given the date-intensive and fiscal-period-based nature of the computations involved, even reasonably well-designed spreadsheet solutions can be error-prone, cumbersome, and difficult to maintain on an ongoing basis.

Computations

The heart of the Lease Footnote Calculator is its processing engine, which produces consistent, accurate results. The Lease Footnote Calculator is not a brand new program. It was first written in 1995, and while the user interface has undergone vast improvements with each new version of Windows, the underlying computation logic and processing engine are unchanged. Companies that currently use the program include a mid-sized New York CPA firm (for several large real estate clients); two prominent New York City real estate firms; and a large home products retailer.

Data Entry

The lease Footnote Calculator’s data entry functions are simple. The lease entry screen is shown in Exhibit 1.

The Lease entry screen presents lease ID, lessee name, lease type, and all lease terms. For each lease term, the begin date, end date, and annual base rent are the only required elements; the program computes all other values. The lease type field is an optional 10-character field that can be used to group leases with a similar attribute (e.g., commercial, residential) on reports.

The lease entry screen also has a “Calc” option, which allows straight-line and future minimum rent reports to be run for the currently displayed lease and the results previewed on-screen. This feature is useful for seeing the immediate results of lease term changes.

Importing Data

Although the Lease Footnote Calculator does not interface directly with popular large-scale property management systems, it provides an import feature that enables lease data from an Excel spreadsheet to be loaded easily. The spreadsheet need only be formatted properly, which is relatively straightforward: columns required for the spreadsheet are lease ID (arbitrary, unique), lease type (arbitrary, optional), lessee name, and for each lease term: begin date, end date, and annual base rent.

The import process is flexible with respect to formatting (especially for date fields), and allows data to be reviewed before being imported. Error checking is similarly extensive, displaying a full description of each error encountered and prohibiting any import until all errors are resolved.

Reporting

The program’s reporting options are extensive and flexible. The reporting window is shown in Exhibit 2.

Reports can be run for the entire population of leases in the data set or for a single lease. Reports can be previewed before printing, and output sent to a spreadsheet or ASCII text file. All reports are recalculated each time they are run to ensure real-time, accurate results. For all reports, only the desired period-end date or range of years needs to be entered; the computation engine does the rest.

The lease footnote report is the heart of the reporting system. It shows straight-line and future minimum rents, straight-line and cumulative adjustments for the specified period-end; followed by five subsequent annual periods; then followed by the “thereafter” portion, representing the remainder of all lease activity after the fifth subsequent period-end.

Monthly and quarterly reports show the same computations in the same basic format as the Lease Footnote Calculator, without the ”thereafter” portion. Quarterly reports can be generated for up to ten years per report; monthly reports can be generated for up to five years per report.

Additionally, reports can be run that show a single computation item: straight-lining, future minimum rents, straight-line adjustment, or cumulative straight-line adjustment. Other reporting options include subtotals by lease or grand totals only (individual lease term details are omitted); sorting by lease ID or lessee name; and grouping by lease type.

The Lease Footnote Calculator runs on any current version of Windows (95/98, NT, 2000, XP). The program is priced at $995, which includes one year of technical support and a reasonable amount of initial assistance in converting and importing existing lease data. Multi-user and site license discounts are available.

Howard D. Hendler is the president of Straight Line Technologies, Inc., a small IT consulting firm in New York, specializing in custom application development for small- and medium-sized businesses. See www.straightlinetech.com for a downloadable demo version, additional screenshots, and sample reports. Straight Line Technologies encourages questions and comments at support@straightlinetech.com.