Creating a lease

Select Leases > Create.

Click Create New Lease.

Specify this information:

Company: Select the Payables company associated with the lease.
Lease: Specify the name of the lease and the description you want to add.

On the Main tab, specify this information:

Classification: Select a classification lease. If left blank, the Classification Test will determine the lease classification.
Type: Select a lease type.
Lease Term: Specify the number of months the property or equipment is leased. This information is used by the classification test as part of the classification criteria.
Total, Remaining Life: Specify the total life and the remaining life of the leased property that is expressed as periods. This information is used by the classification test as part of the classification criteria.
Note: The Total Life is the total useful life of the asset for depreciation in months. The Remaining Life is the remaining useful life of the asset for depreciation at the start of the lease.
Ownership: Select this check box to transfer the ownership to the lessee at the end of the lease. If you select this check box, then the lease classification must be Finance.
Specialized Asset: Select this check box if the asset is specialized.
Project: Select the project account information that is associated with the lease.

Exercise Purchase: Select this check box to classify the lease as a finance lease according to the US GAAP rules. If this field is selected, then a bargain purchase amount must be specified on the Amount tab. The bargain purchase amount is included as a payment at the end of the lease.
Land And Building: Select whether the land and building classification is Land Only, Land And Building Lease, or Neither.
Land Value, Building Value: If you select Land And Building Lease on the Land and Building field, then specify the fair market value of both the land and building.
If you select Land Only, then specify the fair market value of the leased land.

On the Amounts tab, specify this information:

Currency

If the transaction currency is different from the lessor company functional currency, then select a currency. If this field is blank, then the company functional currency is used.

Exchange Rate

Specify the exchange rate between the company functional currency and the lease transaction currency.

Investment Tax Credit

Specify the lessor's tax credit amount.

Security Deposit Amount

Specify the security deposit amount.

Lease Accounting Method

The lease accounting method is determined by the value on the accounting entity for the Payables company on the lease.

Down Payment Amount

Specify the amount that is paid to the lessor at the beginning of a lease. This amount is used to reduce the lease obligation and to secure the contract. No invoice is created by Lease Accounting for this payment. You must manually create a Payables invoice or use an non-lease component in Payment Schedule to generate an interfaced invoice.

Bargain Purchase Amount

If Exercise Purchase Flag check box is selected, then this amount is paid by the lessee to purchase the asset at the end of the lease.

Residual Guaranteed Amount

Specify the Residual Guaranteed Amount. The specified amount will be added as a lease payment at the end of the lease. The lease cannot have a bargain purchase amount that is Exercise Purchase and a Guaranteed Residual.

Residual Unguaranteed Amount

Specify the unguaranteed residual value of the asset at the end of the lease.

Fair Market Value at Inception

Specify the fair market value of the leased item at the inception of the lease. This information is used by the classification test as part of the classification criteria.

Incentive Amount

Specify the incentive amount. Incentive amounts are calculated similar to free rent. For example, one month free or reduced rent. Incentive amount affects the use of asset value and rent expense amount.

Initial Direct Cost

Specify the initial direct cost. This amount is used for disclosure report and ROU calculation.

Note: For leases created with GASB 96 as the lease accounting method, these fields are available instead:

Add Initial Direct Costs

Select this button to create multiple initial direct costs.
Total Initial Direct Costs

If you specified multiple direct costs, the total of that is displayed in this field.

Initial Direct Cost Vendor: Select the initial direct cost vendor. The initial direct costs must be paid to the vendor, not to the lessor.

On the Lease Fund tab, specify this information:

Note: The Lease Fund tab is only visible if the Fund Accounting is turned on the FEG.

Accounting Entity: Specify the accounting entity associated to this transaction.
Fund: Specify the fund details of the accounting entity.
Percent: Specify the contribution percentage for this fund.

Verify the details then click Save.

On the Payment tab, specify this information:

Current Lessor

Select the name of the vendor.

First Payment Date

Select the date of the first lease payment.

Invoice Prefix

Specify a prefix that is connected to the payment number. This prefix is used to create the invoice number for Payables. The first 16 characters of the Lease field is the default. This field can be overridden.

Payment Timing

Select the Lease Payment Timing. The options are the beginning of period the or the end of the period. The payment timing is used to created the lease amortization.

Lessee Discount Rate

Select the Discount Rate for the Lease.

Implicit Interest Rate

Specify the lessor's interest rate.

You must specify either the Implicit Interest Rate or Lessee Discount Rate on the lease.

Allocation Code

Select a valid allocation code to attach to the liability account on the lease. Use this code to allocate percentages of an expense to different companies and dimensions.

Allocation Code Type

Select whether the allocation code type is Liability or Interest.

Lease Liability Account

Specify the account information where the lease liability is posted. If the Short-Term Liability Accounting is enabled on the Finance Enterprise Group, you can assign accounts for short-term and long-term lease liability.

Liability Account

Specify the account information for lease liability.

For leases, you have two options:

Specify a Liability Account
Add the liability account in the Allocation Code field and set the Allocation Code Type to Liability.

You cannot do both.

Deferred Rent Account

Specify the account information for deferred rent.

Interest Account

Specify the Interest Account for the Lease. You must specify this value if the lease is a Finance Lease or a GASB 87 lease.

Operating Lease Expense Account

Specify the Operating Lease Expense Account. This is needed if the lease is an Operating Lease. For example, an Operating Lease that is more than 12 months long.

If the Short-Term Liability Accounting is enabled in the FEG, specify the Short-Term and Long-Term Liability account instead of the Lease Liability account.

The Short-Term or Current Liability will be the liability amounts for the next 12 periods on the lease. The remaining liability after the next 12 periods will be the Long-Term Lease Liability. The total Liability on the Lease will be the sum of the Short-Term and Long-Term Lease Liability. Note in the final year of the lease Short-Term Lease Liability will be equal to the lease liability, so there will be a Short-Term Lease Liability on the Balance Sheet with no Long-Term Lease Liability.

On the Classification tab, the results of the classification test are displayed:

Ownership: If the ownership of the leased property is transferred to the lessee at the end of the lease, then the value is Yes. The lease classification is Finance. See the Ownership field on the Main tab.
Bargain Purchase Option: If the lessee selects Exercise Purchase, then this field is Yes and the classification is Finance Lease. The Bargain Purchase Amount is specified on the Amounts tab.
Economic Life to Lease Term: If the lease term at inception is greater than or equal to 75 percent of the estimated economic life of the leased property, then this field is Yes. The lease is Finance. The estimated economic life is the Total Life field of the Main tab. This is used regardless of whether the asset is purchased or owned by the lessee at the end of the lease.
Present Value to Market Value: If the value of the minimum lease payment at the beginning of the lease is 90 percent or more of the fair market value at the inception of the lease, then this field is Yes and the lease is Finance. This value is used whether the lease is purchased or owned by the lessee at the end of the lease.
Net Present Value: The minimum lease payments that are used in the Present Value to Market Value calculation. The amount is shown in both Transaction and Base currency.
Lease Obligation: The present value of lease payments. This amount is booked to the liability account that is specified on the Payment tab.
Unless there are Incentive, Down Payment, or Initial Direct Cost on the lease, the Lease Obligation is the equal to the ROU Asset Amount less the net of the Incentives, Down payments, and IDC.

On the Options tab, specify this information:

Last Date Reviewed

Select the last date of the last review.

Early Termination Date

Select the early termination date on the lease agreement if specified. This date is usually before the end date of the lease.

Termination Fee

Select the Termination Fee on the lease agreement for early termination of the lease.

Termination Option

Select this if the lease agreement has the option for early termination.

Termination Non Lease Component

Specify the expense account for the termination fee, if one exists.

Termination Gain Loss Account

Specify the account code block for any gain or loss on early termination.

Reasonably Certain

Select this check box if you are reasonably certain to terminate the lease early.

For ASC842 leases, If the termination is reasonably certain, then the end date on the lease is the Early Termination Date. The user must specify payments only up to the Early Termination Date, and the lease amortization must be calculated only up to the Early Termination Date.

For GASB leases, if the Early Termination option is selected, then the lease ends on the Early Termination Date regardless if the termination is reasonably certain.

Renewal Option

Select this option is the lease agreement has a renewal option.

Reasonably Certain

Select this option if you are reasonably certain to renew the lease.

For ASC842 leases, If the renewal is reasonably certain, then the end date on the lease is the lease term plus the renewal term. The user must specify payments for both the lease term and the renewal term, and the lease amortization includes both the lease term and the renewal term.

For GASB leases, if the renewal option is selected, then the lease term includes both the lease and renewal regardless if the renewal is reasonably certain.

Number Of Renewal Options

Specify the number of renewals for this lease.

Renewal Term In Months

Specify the number of months for the renewal term.

Renewal Notification Date

Select the Renewal Notification Date on the Lease Agreement.

Acquired Business Combination

Select this check box if the lease has acquired business combination.

Simulated

Select this check box if the lease is simulated.

Simulated leases can be used to run various lease scenarios without any effect on the books.

Related Party Lease

Select this check box if the lease has an involved related party.

The Amortization tab, displays the Amortization for the Lease.

Click Save.

The Non Lease Component and Attachments tabs are now available.