Automate ASC 842 lease ROU asset and liability schedules

Steps

1. For each lease, collect key inputs: commencement date, lease term (months), lease payments schedule (amount and timing), payment frequency, implicit or incremental borrowing rate (IBR), and classification (operating or finance lease) per ASC 842-20-25.
2. Compute the initial lease liability as the present value of future lease payments using the IBR as the discount rate; compute the ROU asset as the initial lease liability plus any initial direct costs and prepaid rent, less any lease incentives received.
3. Build the amortization schedule: for each period, compute the interest component (beginning lease liability multiplied by the IBR divided by the number of periods per year), reduce the liability by the principal payment (total payment minus interest), and for operating leases, compute the straight-line lease cost and the ROU asset amortization as a balancing plug.
4. Generate journal entries per period: for operating leases, debit operating lease expense and credit ROU asset amortization and interest; for finance leases, debit amortization expense (ROU asset) and interest expense separately, crediting accumulated amortization and lease liability.
5. Post the journal entries to the ERP via the journal entry API on each period-end date; update the lease schedule table with the new beginning balance for the following period after each posting.
6. At each period-end, reconcile the sum of all lease liability balances in the schedule table against the GL lease liability account and the sum of ROU asset net book values against the GL ROU asset account; produce the ASC 842 disclosure summary (weighted-average remaining term, weighted-average discount rate, maturity analysis of future payments).