Commencement Date
Related terms
Category
General Concepts
The commencement date is the date on which a lessor makes the underlying asset available for use by the lessee. It is the date when the lessee begins to recognize the right-of-use asset, lease liability, and all initial measurements under ASC 842 and IFRS 16.
Why it matters
The commencement date triggers all initial accounting. ROU asset recognition, lease liability measurement, and classification determination. It is distinct from the lease execution date (when the contract is signed) and may be different from the possession date. Getting this date right is critical because it determines when balance sheet recognition begins and which discount rate applies.
For construction or build-to-suit arrangements, the commencement date may be significantly later than the contract signing, affecting both the period of recognition and the discount rate used.
How Arvexi handles this
Arvexi's Document Intelligence extracts commencement dates from lease agreements and distinguishes them from execution dates and possession dates. The platform triggers initial measurement calculations on the commencement date and generates the appropriate journal entries for that period.