"In leasing, the details are everything." It's month-end, and you're drowning in lease data across seventeen different spreadsheets. You're calculating right-of-use assets manually whilst praying the IFRS 16 figures add up before your auditor arrives next week.
Most property teams face this exact nightmare every month. Manual calculations eat up days, compliance errors trigger audit flags, and your finance team dreads the monthly close process.
Here's the thing—it doesn't have to be this way. Lease accounting by NetSuite handles these complex calculations automatically. The platform tracks your right-of-use assets, manages lease liabilities, and generates compliant reports without the spreadsheet chaos.
Your monthly close transforms from a week-long ordeal into a predictable, automated process. Clean data, audit-ready reports, and zero manual errors become your new normal. Ready to see how the best property teams are doing this?
TL;DR (Key Takeaways)
- Automated Compliance: NetSuite automates IFRS 16 and ASC 842 compliance with built-in features like Fixed Assets SuiteApp
- Data Integrity: RIOO ensures accurate lease data migration and ongoing remeasurement updates
- Monthly Close: NetSuite streamlines month-end close and multi-book reconciliation for lease accounting
- Audit-Ready: Ensure all lease records are compliant and easily accessible for audits using NetSuite's reporting tools
What is Lease Accounting in NetSuite?
NetSuite is a cloud-based ERP system created by Oracle in 1998. It provides a comprehensive suite of business solutions, helping companies manage everything from finances to operations. In Q4 of Fiscal 2024, NetSuite Cloud ERP revenue reached $0.8 billion, growing 19% from the previous year, reflecting its strong market presence.
NetSuite simplifies lease accounting by automating tasks like tracking ROU Assets and Lease Liabilities, ensuring compliance with IFRS 16 and ASC 842. It makes the entire process more efficient, reducing manual errors and improving accuracy in financial reporting.
Essential Components of Lease Accounting in NetSuite:
- Right-of-Use (ROU) Asset – Your right to use the leased property, calculated from lease payments plus initial costs
- Lease Liability – Present value of all future lease payments using your discount rate
- Lease Term – Contract period, including renewal options, NetSuite determines are reasonably certain
- Discount Rate – Interest rate used to calculate present values (incremental borrowing rate or implicit lease rate)
- Initial Direct Costs – Legal fees, broker commissions, and setup costs added to the ROU asset
- Lease Incentives – Rent-free periods, tenant improvements, and landlord contributions that reduce the ROU asset
IFRS 16 vs ASC 842: What's the Difference?
Both standards aim for transparency in lease reporting, but they differ in application and geography.
What IFRS 16 Means for Your Business:
Under IFRS 16, virtually all leases appear on your balance sheet as assets and liabilities. This includes office leases, equipment rentals, and vehicle agreements.
The standard eliminated the previous operating lease classification, meaning your financial statements now reflect the true scale of lease commitments.
Exempt Leases: Under IFRS 16 and ASC 842, certain leases can be exempted from being recognised on the balance sheet:
- Short-Term Leases: Leases with a term of 12 months or less can be excluded.
- Low-Value Leases: Leases for assets like small office equipment may also qualify for exemption.
NetSuite simplifies managing these exemptions, ensuring compliance while keeping your accounting processes efficient.
Common Lease Scenarios NetSuite Handles:
- Rent escalations – Automatic calculation of stepped rent increases
- Lease modifications – Recalculation when terms change mid-contract
- Variable payments – Tracking of payments tied to performance or usage
- Short-term leases – 12-month exemption handling for smaller commitments
Your month-end closing becomes faster, audit trails remain complete, and compliance happens automatically without manual spreadsheet calculations.
Now, let’s see how NetSuite simplifies monthly lease calculations and keeps everything running smoothly.
How Does NetSuite Handle Monthly Lease Calculations?
Monthly lease calculations shouldn't consume your team's time. NetSuite makes lease accounting easy by automating amortization and journal entries. Here’s a simple breakdown:
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Automating Amortization
Lease amortization is the process of spreading the lease cost over its term. In NetSuite, once you input key lease details like:
- Lease start date
- Lease term
- Payment schedule
NetSuite automatically calculates the Right-of-Use (ROU) Assets and Lease Liabilities over time, following IFRS 16. This removes the need for manual tracking, ensuring consistency and accuracy.
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Streamlining Month-End Close
NetSuite also automates journal entries for lease payments. Every month, it updates your financial records with the correct figures, so your accounts are always accurate without needing manual input. This makes month-end closing much faster and simpler.
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Ensuring Compliance with Reporting Standards
NetSuite automates the generation of essential lease accounting reports, ensuring compliance with IFRS 16 and ASC 842. These key reports include:
- Balance Sheets: Automatically updated with Right-of-Use (ROU) Assets and Lease Liabilities, ensuring you stay compliant without manual entry.
- Cash Flow Statements: NetSuite generates accurate cash flow statements reflecting lease payments and adjustments, providing financial clarity and transparency.
This reduces manual work and ensures your financial records are always audit-ready, with the peace of mind that you’re fully compliant.
Next, let's walk through the easy steps to set up lease accounting in NetSuite.
How Do You Set Up Lease Accounting in NetSuite?
Setting up lease accounting in NetSuite is a straightforward process, but it requires a few essential steps to ensure everything runs smoothly and in compliance with IFRS 16.
Before you start, you'll need:
- Administrator access to your NetSuite account
- A list of all your company's leases (office rent, equipment rentals, etc.)
- Basic lease information: monthly payment amounts, start dates, how long each lease lasts
Step 1: Turn On the Lease Tracking Tool
What you're doing: Activating NetSuite's built-in lease calculator
How to do it:
- Log in to NetSuite as an administrator
- Go to Setup → Company → Enable Features
- Click the SuiteCloud tab
- Find "Fixed Assets" and check the box
- Click Save
Why this matters: This turns on NetSuite's automatic calculator that will do all the complex math for you.
Step 2: Create Lease Types
What you're doing: Telling NetSuite what kinds of rentals you have
How to do it:
- Go to Lists → Accounting → Lease Types
- Click New
- Create simple names like:
- "Office Rent"
- "Equipment Rental"
- "Vehicle Lease"
- For each type, choose either "Operating" or "Finance" (your accountant can tell you which)
Why this matters: This helps NetSuite organize your different rentals and apply the right accounting rules to each.
Step 3: Add Your Lease Information
What you're doing: Entering each rental agreement into NetSuite
How to do it:
- Go to Lists → Accounting → Leases
- Click New Lease
- Fill in the basics:
- Lease Name: Something simple like "Main Office Rent"
- Start Date: When your lease began
- End Date: When your lease expires
- Monthly Payment: How much you pay each month
- Interest Rate: Ask your accountant for this number (usually 3-8%)
Why this matters: NetSuite needs these details to calculate how much your lease is "worth" on your balance sheet.
Step 4: Set Up Payment Tracking
What you're doing: Telling NetSuite when and how much you pay
How to do it:
- While creating each lease (from Step 3), click the Payment Schedule tab
- Choose Monthly (or whatever matches your actual payments)
- Enter your payment amount
- Set the payment date (like "1st of each month")
Why this matters: NetSuite will automatically create reminders and track what you owe versus what you've paid.
Step 5: Let NetSuite Handle the Monthly Calculations
What you're doing: Setting up automatic monthly updates
How to do it:
- Go to Setup → Accounting → Accounting Preferences
- Find the Lease Accounting section
- Check "Auto-generate monthly entries"
- Choose your fiscal calendar
Why this matters: Every month, NetSuite will automatically update your books without you having to remember to do anything.
What Happens Next?
Once set up, NetSuite will:
- Automatically calculate how much each lease is "worth" as an asset
- Track how much you still owe on each lease
- Create monthly journal entries (accounting records)
- Generate reports for your accountant
- Send alerts when leases are about to expire
If you get stuck:
- Your NetSuite account should have help documentation
- Contact your company's accountant - they understand the "why" behind these rules
- Consider hiring a NetSuite consultant for the initial setup
RIOO takes the hassle out of property accounting by automating tasks like rent collection, expense tracking, and vendor payments.
- Track real-time income and expenses
- Generate tax-compliant financial reports with ease
- Effortlessly manage tenant ledgers and payment histories
RIOO seamlessly integrates with NetSuite, ensuring smooth, accurate lease accounting and giving you more time to focus on what truly matters.
Leases don’t always stay the same—let’s see how NetSuite keeps up with changes and updates.
Managing Lease Modifications and Changes in Terms
Leases aren’t always static—modifications, renewals, or performance-based adjustments often come into play.
Let’s go over how NetSuite simplifies the handling of these lease changes to ensure that your accounting remains accurate and compliant throughout the lease term.
a) How NetSuite Handles Lease Modifications
Leases often change due to factors like renewal options, renegotiated terms, or changes in the leased asset’s usage. NetSuite streamlines this by:
- Automatic Adjustments: When a modification occurs (e.g., an extension or change in lease terms), NetSuite automatically recalculates the associated Right-of-Use (ROU) assets and lease liabilities.
- Dynamic Tracking: NetSuite tracks both the present value of future payments and the discount rate to ensure all figures remain accurate, even when the terms shift.
b) Adjustments to Right-of-Use (ROU) Assets and Lease Liabilities
When the lease changes, so do the key accounting figures:
- ROU Asset Adjustments: NetSuite updates the ROU asset based on the new terms (such as rental rate changes or extended lease duration).
- Lease Liability Recalculations: Any changes in lease payments or discount rates are reflected automatically in lease liabilities, ensuring that the balance sheet remains accurate.
c) Tracking Variable Payments and Rent Escalations
Leases sometimes include variable payments tied to performance, usage, or specific milestones. NetSuite handles these complexities with precision:
- Variable Payments: NetSuite tracks any payments that fluctuate based on usage or performance, ensuring accurate lease liability reporting.
- Rent Escalations: Automatically incorporates step rent increases into calculations, ensuring no adjustments are missed.
Want to avoid pitfalls? Here’s how to steer clear of common lease accounting mistakes.
Common Mistakes in Lease Accounting and How to Avoid Them
When managing leases, property teams often encounter challenges that can lead to costly mistakes. Here's how to avoid them using lease accounting NetSuite:
Mistake 1: Misclassifying Operating vs Finance Leases
Solution: NetSuite’s clear lease type categorization ensures that each lease is correctly classified as either an operating or finance lease. This prevents costly misclassifications that could affect your balance sheet.
Mistake 2: Failing to Track Lease Modifications Correctly
Solution: With NetSuite IFRS 16, any changes to lease terms; whether it’s a lease extension or a change in payment structure, are automatically updated. NetSuite recalculates the Right-of-Use (ROU) assets and lease liabilities in real-time, ensuring accuracy.
Mistake 3: Inaccurate Rent Escalation Calculations
Solution: Rent escalations can be a nightmare to track manually. Lease accounting NetSuite automates the calculation of stepped rent increases, so you never miss an update and remain compliant with contract terms.
Mistake 4: Poor Month-End Closing Due to Manual Calculations
Solution: Manual lease calculations slow down the close process and increase the risk of errors. NetSuite’s automated system updates your financial records every month, ensuring a fast, accurate, and compliant close.
Mistake 5: Missing Out on Short-Term Lease Exemptions
Solution: Short-term leases often get overlooked in manual systems. NetSuite’s automated tracking ensures that 12-month lease exemptions are correctly applied, saving time and ensuring compliance with IFRS 16.
Must read: Common Challenges in Lease Management and How Technology Solves Them
Practical Tips for Seamless and Error-Free Lease Management Year-Round
Managing lease accounting shouldn’t be a seasonal task. Here’s how property teams can stay on top of lease management, ensuring everything runs smoothly throughout the year.
1. Run Monthly Data Health Checks
Schedule monthly audits of lease data; payments, terms, and liabilities. Even automated systems need human oversight.
NetSuite's real-time data tracking makes these checks faster, but you still need to verify accuracy and catch discrepancies before they snowball into bigger problems.
2. Set Smart Renewal Alerts
Missing lease renewals costs money and creates chaos. Configure NetSuite's reminder system to alert you 90 days before expirations.
This gives your team proper time to negotiate better terms, review market rates, and plan replacements without panic decisions.
Also read: 15 Smart Strategies for Landlords to Optimize Lease Renewals in 2025
3. Handle Lease Changes Immediately
When lease terms change—rent adjustments, space modifications, or tenant improvements- update your system that day.
NetSuite automatically recalculates Right-of-Use assets and lease liabilities, but only if you input changes promptly. Delayed updates create accounting headaches later.
4. Stay Ahead of Compliance Changes
Review lease documentation quarterly against current IFRS 16 requirements. Regulations shift, and your documentation must keep pace.
NetSuite's reporting tools generate compliant lease reports automatically, but you need to verify they match the latest standards your auditors expect.
5. Automate Payment Tracking
Manual payment entry creates errors. Use NetSuite's integrated payment system to record transactions automatically and update your accounts in real-time.
Generate monthly cash flow reports to spot missed payments or accounting errors before they affect your financial statements.
Property management without hassle?
That’s exactly what RIOO brings to the table. From automated rent collection and vendor management to detailed financial reporting, RIOO simplifies your property management tasks.
Book a demo today and experience the difference.
FAQ
- What is lease accounting in NetSuite?
Answer: Lease accounting NetSuite is a cloud-based solution that automates the management of lease agreements. It helps businesses track Right-of-Use (ROU) assets, lease liabilities, and ensures compliance with standards like IFRS 16 and ASC 842, making accounting more accurate and efficient.
- How does NetSuite help with IFRS 16 compliance?
Answer: NetSuite automates lease accounting processes to ensure compliance with IFRS 16. It automatically calculates ROU assets and lease liabilities, generates the required reports, and keeps your records up to date with minimal manual input.
- Can NetSuite handle both operating and finance leases?
Answer: Yes, NetSuite allows you to easily classify and manage both operating and finance leases. It ensures the correct treatment of each lease type based on your company’s needs, following the proper accounting rules.
- How does NetSuite handle lease modifications?
Answer: When lease terms change, NetSuite automatically updates the necessary records. It recalculates ROU assets and lease liabilities, ensuring your financial statements reflect the new lease terms without any manual intervention.
- How does NetSuite help with the month-end lease accounting close?
Answer: NetSuite automates the process of updating lease-related journal entries, so your month-end close is much faster. It ensures accuracy in financial records and eliminates manual work, giving your team more time for other tasks.
End Note
Automating lease accounting isn’t just a good idea, it’s essential to stay compliant with IFRS 16 and ASC 842. With the right tools, you can keep your lease data accurate, reports on time, and your team free from manual errors.
With RIOO, you get an all-in-one solution to handle the entire lease accounting lifecycle. From automating rent collection to simplifying financial reporting, RIOO makes managing your property portfolio seamless and stress-free.
If your lease accounting process feels more complicated than it should, it might be time for a change. Explore how RIOO can streamline your workflow and take the hassle out of lease management—book a demo today!
Must read: How Lease Accounting Affects Your Bottom Line: A Guide for Property Managers
