Capital vs. Operating Leases
Four tests required to determine if a lease is a Capital instead of an Operating Lease are as follows:
Test 1 – Does Title Revert to Tenant
Test 2 – Is there a Bargain Purchase Option
Test 3 – Is the lease greater than 75% of Remaining Life of the building
Test 4 – Is the Present Value of Rent greater than 90% of the Fair Market Value of the building?
Lx LseMod Corporate includes these four tests.
How do Lucernex applications help with SOX rent compliance?
Because Lx LseMod Corporate does rent analysis on a GAAP basis, it can be part of a solution that will meet the requirements of Sarbanes Oxley. Additionally, users can evaluate different scenarios that may happen partially through a lease term by adjusting the rent to a predetermined GAAP value. Note: Lx LseMod has developed a number of software solution for real estate financial analysis and also has applications that evaluate leases based on just Cash Flow and do
not include the corporate P&L (the part requiring GAAP) and taxes.
See a Sample Financial Report handling GAAP for SOX compliance.
See a Sample P&L Impact Report handling GAAP for SOX compliance.
In Q1 2010, Lx LseMod Corporate will be integrated into the Lx IWMS in our Lease Administration and Rent Accounting solution (Lx Contracts). This solution will enable users to utilize the time tested Lx LseMod Corporate financial engine within the Lx IWMS to perform GAAP rent analysis and all other analyses in the solution, and instantly include them in site selection and lease renewal decision processes.
Other Lx Contracts features that support GAAP compliance:
- Straight-line rents
- Rent accrual during construction
- TI credit to rent
- Over-ride GAAP rent for scenario analysis
- Other rents, e.g. satellite dish, based on GAAP
- Restoration accrual (FASB 143)
- Restoration carry-over
- Sublease analysis based on GAAP
- Ability to add costs later in term (mid-term construction) and account for LL TI$