Creating a lease

Select Lease Addition and Adjustments (LM21.1).

Specify this information:

Company: Select the lease company name.
Lease: Select the lease name and provide a description for the lease.

On the Main tab, specify this information:

Simulated

Select whether the lease is simulated or real. You can use simulated leases to run various lease scenarios without impacting the books.

Type

Select a lease type.

Lease Term

If you use the FAS 13 test, then specify the number of months for which the property is leased.

Date Range

Select the date range indicating the dates on which the lease begins and ends. The date range is required for all leases.

Total, Remaining Life

Specify the total life of the leased property, expressed as a number of periods.

Specify the remaining life of the leased property at the inception of the lease, expressed as a number of periods.

Ownership

Select the ownership status. The ownership status indicates whether the ownership of the leased property is transferred to the lessee at the end of the lease.

Activity, Account Category

Select an activity that is used on invoices that you create for the lease.

Select an account category value that is used on invoices that you create for the lease.

User Analysis

Specify a user analysis value that is used on invoices that you create for the lease.

On the Amounts tab, specify this information:

Currency

If the lease transaction currency is different from the company base currency, then you must select a currency. If this field is blank, then the company base currency is used.

Exchange Rate

You can override the exchange rate that exists in Currency between the company base currency and the lease transaction currency. If the Exchange Rate field is blank, then the exchange rate in the Currency application is used.

Down Payment Amount

Specify the amount paid to the lessor at the beginning of a lease to reduce the lease obligation and secure the contract.

This amount is used to calculate the base obligation for FAS13 calculations.

No invoice is created by Lease Management for this payment. You must manually create an Accounts Payable invoice or use an Non-Lease Component on payment schedule to generate an interfaced invoice.

Security Deposit Amount

Specify the security deposit amount. This field is for reference only. Run Security Deposit Listing (LM247) to generate a list of security deposits.

Bargain Purchase Amount

Specify the bargain purchase amount. That is the amount a lessee will pay to purchase the leased asset at the end of the lease if a bargain purchase option is included in the lease. If this amount is not zero, then the lease classification must be Finance.

Note: This field is for information only and not used in FAS13 test calculations. You must specify a payment schedule for the lease before you can run the FAS13 test.

Residual Guaranteed Amount

Specify the estimated fair value of the leased property at the end of the lease that is guaranteed by the lessee or another party to the lease. This is also called guaranteed residual value.

Note: This field is for information only and not used in FAS13 test calculations. You must specify a payment schedule for the lease before you can run the FAS13 test.

Residual Unguaranteed Amount

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

Investment Tax Credit

Specify the lessor's investment tax credit amount.

Fair Market Value at Inception

Specify the fair market value of the leased item at the inception of the lease.

Incentive Amount

Specify the incentive amount. Incentive amounts calculates similarly to free rent and affects the use of asset value and rent expense amount.

Purchase Amount of Asset

Specify the purchase amount of asset. This amount is the lessee pays to purchase the asset at the end of the lease.

Initial Direct Cost

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

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 Land tab, specify this information:

Land only: If the lease includes only land, then select Y.

Note: You cannot have both the Land Only and Land and Building fields set to Y.
Land only Value: Specify the value of the land.
Land and Building: If the lease includes a combination of land and building, then select Y.

Note: You cannot have both the Land Only and Land and Building fields set to Y.
Land Value: Specify the value of the land.
Building Value: Specify the value of the building.

On the Payment tab, specify this information:

Current Lessor

Select the name of the lessor.

If the lessor has changed for this lease, then you can view historical lessors for this lease by running Lease Audit Report (LM135) or Invoice Listing (LM231).

Payments Per Year

If the lease is a finance lease or if you want to run a FAS 13 test, then you must specify the number of lease payments per year.

Invoice Prefix

Specify a prefix that is concatenated to the payment number to create the invoice number for Accounts Payable.

The value is the first 16 characters of the Lease field.

Payment Timing

If you are running the FAS 13 test or the lease is a finance lease, then you need to indicate whether payments are created at the beginning (B) or the end (E) of a lease period.

First Payment Date

Select the date of the first lease payment.

Lessee Discount Rate

If you use the FAS 13 test, then you must specify the lessee's discount rate. This rate is the discount rate the lessee must pay if borrowing the money to finance the lease.

This rate is also known as the incremental borrowing rate.

Implicit Discount Rate

Specify the lessor's discount rate. If the rate is unknown, then the rate is calculated by the FAS 13 test.

This rate is required for finance lease discount calculations. If you run the FAS 13 tests more than once to calculate the implicit discount rate, then delete the produced rate from the previous FAS 13 test.

Debt or Expense Account

If the lease is classified as Finance, then select the company to which the financial debt is posted.

If the lease is classified as Operating, then select the company to which the operating expense is posted.

If you do not know the classification, then use your best guess. You can change the company after you classify the lease.

Note: You can change the value of the company, accounting unit, account, or subaccount after the lease has been released. However, it is your responsibility to manually move existing debt balances to the new company, accounting unit, account, or subaccount within General Ledger.

Debt or Expense Activity

If you use Project Accounting, then select an activity and account category to which debt is posted.

See the Project Accounting User Guide.

Debt or Expense Allocation Code

Select an allocation code to the debt or expense account of an operating lease.

Discount Account

If the lease is classified as Finance, then select the company to which the discount expense is posted.

If no company is specified, then the lessor's Accounts Payable company is selected.

Discount Activity

If you use Project Accounting, then select an activity and account category to which discount expense will be posted.

See the Project Accounting User Guide.

Discount Allocation Code

Select an allocation code to the discount account of a finance lease.

Deferred Rent Account

Specify the deferred rent account information.

Accrued Rent Account

If you are accruing a portion of the lease payment or the entire payment, then provide the accrued rent account information.

On the Components tab, specify this information:

Non-Lease Component

If your lease costs include no-lease components, then you must select the non-lease components to attach to the lease.

Non-lease components are defined on Non-Lease Component (LM05.1).

Note: A non-lease component is in addition to the capital and discount costs associated with a lease and can represent such costs as taxes, maintenance fees, or insurance. It can be included or excluded from the regular lease payment amount.

Company

Optionally, you can override the company and the account information set up for each code. If this field is blank, then you must provide them.

Allocation Code

Select an allocation code to attach to the non-lease component on the lease.

On the Dates tab, specify this information:

Date Code: Select a date code that is assigned to the lease.
Date: Select a date that is assigned to the lease.

Verify the data that you specified for the lease.

Run Lease Listing (LM221) to list all the leases defined using Lease Addition and Adjustments (LM21.1).
If you have specified non-lease components, date codes, attributes, or comments, then select Y in these fields so that the information is included in the report.

Optionally, you can change the data that you have defined for the lease on Lease Addition and Adjustments (LM21.1). Use the Change form action to change any of the data.