Running a class test on a single lease

Directly select a lease classification using the Override button on LM21.1. You can create the determination by running a classification test.

  1. Select Lease Addition and Adjustments (LM21.1).
  2. Select Inquire and click Class Test.
  3. View the results of the test on the Class Test tab:
    Ownership

    If the ownership of the leased property is going to be transferred to the lessee at the end of the lease Ownership field on Main tab, then the displayed value is Y and the lease classification is Finance.

    Bargain Purchase Option

    If the lease has a bargain purchase option on the Amounts tab, then this field is Y and the classification is Finance.

    Economic Life to Lease Term

    If the lease term at inception is equal to 75 percent or more of the estimated economic life of the leased property, then this field is Y and the lease is Finance, whether the lease is purchased or owned by the lessee at the end of the lease.

    Present Value to Market Value

    If the present value of the minimum lease payments 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, whether the lease is purchased or owned by the lessee at the end of the lease.

    Net present Value

    Displays the minimum lease payments used in the Present Value to Market Value calculation.

    Note: The amount is displayed in both lease transaction and company base currency.
    Lease Obligation

    Displays the smaller amount of the minimum lease payments or the fair market value of the lease at inception. This is the fair market value number used in the Present Value to Market Value calculation.

    Note: The amount is displayed in both lease transaction and company base currency.
  4. If you are not satisfied with the results of the test, then use LM21.1 to create changes to the lease and run the test again.

Related reports and inquiries

Lease Management data analysis and reports

Action Process
Verify the classification of a lease Lease Listing (LM221)
Related topics