What Auditors Want to See in a Lease Subledger, From Rollforward to Tie-Out

A lease subledger is the lease-by-lease detail behind the lease balances in your general ledger. Auditors expect five things from it. It should cover every lease, roll forward from the prior year and tie to the general ledger. It should also trace each entry to its period and each balance to its inputs. If yours does all five, the rollforward, the tie-out and the entry tracing become reports you can run.

What belongs in a lease subledger

Under ASC 842, a lessee recognizes a right-of-use asset and a lease liability at commencement (ASC 842-20-25-1). Your general ledger usually holds those as a few summary accounts. The subledger holds what those accounts are made of.

For each lease, that means:

• The right-of-use asset and lease liability, opening and closing, for each period.
• The activity between them: new leases, interest accretion, payments, amortization, modifications and terminations.
• The expense for the period. An operating lease carries a single lease cost, generally on a straight-line basis (ASC 842-20-25-6). A finance lease recognizes amortization of the right-of-use asset and interest on the lease liability (ASC 842-20-25-5), and the footnote shows the two separately (ASC 842-20-50-4).
• The journal entries that produced those balances, with the general ledger account each one posts to.

The subledger is not your general ledger. Cash, equity and the rest of the entity's accounts live in the general ledger. That boundary is why the tie-out below matters.

The five things an auditor expects from it

Auditors often test the report themselves. A schedule from your system is still evidence that has to be reliable. For the test work itself, see how auditors test ASC 842 lease data.

A worked tie-out to the general ledger

Here is a small example, with illustrative figures, of the lease liability at year-end. The rollforward comes from the subledger.

In this example the $1,600 traces to a manual entry someone posted to the liability account outside the lease process. The fix is to reverse it, or to record what it was really for. "Immaterial" is not an explanation an auditor will accept without seeing what the item is.

The differences that recur are ordinary ones:

• A journal entry was generated but never posted, or posted to the wrong period.
• A manual entry hit a lease account directly.
• A subledger account has no general ledger code, so its activity landed somewhere else.
• A modification was recorded in one place and not the other.

Run the same tie-out on the right-of-use asset. Our lease liability reconciliation guide covers the monthly process, and the right-of-use asset rollforward schedule covers the asset side.

Why a balanced subledger can still be wrong

Debits equal to credits is a good sign and a low bar. It shows the math holds together. These problems can all sit inside a subledger that balances perfectly:

• A missing lease: a lease nobody entered produces no entries, so nothing is out of balance. That includes a lease embedded in a service contract.
• A wrong input: a mistyped payment or commencement date flows through every schedule consistently.
• An unsupported judgment: a lease term that assumes a renewal, or a discount rate with no support behind it, calculates cleanly either way.
• A change nobody reported: an amendment that never reached accounting leaves the old numbers intact and balanced.

So treat system checks as one control, not the whole control. The rest is your process for finding leases and hearing about changes, and someone reviewing the inputs.

Tie the subledger to the footnote too

Auditors will also compare the subledger with your disclosures, so build that link before fieldwork. Three common checks:

• Maturity analysis: shown separately for finance and operating leases, it must include a reconciliation of the undiscounted cash flows to the lease liabilities on the balance sheet (ASC 842-20-50-6).
• Quantitative disclosures: lease cost, cash paid, weighted-average remaining lease term and weighted-average discount rate should come from the same data (ASC 842-20-50-4).
• Presentation: operating and finance lease balances cannot be combined in one line on the balance sheet (ASC 842-20-45-3).

How iLeasePro handles the lease subledger

iLeasePro produces a trial balance for each lease and for the portfolio, as a snapshot and as a period rollforward. Automated checks confirm that debits equal credits and that the trial balance agrees with the balance sheet and income statement views. Each row shows its mapped general ledger code and marks any account that has none.

Those checks test the subledger against itself. Your team still compares it with the general ledger and still owns the completeness of the lease list and the judgments behind each lease. To see the reports, you can request an iLeasePro demonstration.

Sources and further reading

• Deloitte, Roadmap: Leases, chapters on lessee accounting, presentation and disclosure.
• FASB Accounting Standards Codification, Topic 842, Leases, Subtopic 842-20, Lessee.

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