Enter New Standard Terms

Explanation

This activity is used to enter new periodical minimum lease payments (Fixed or Incremental) as a result of extending the lease term. These payment terms are known as Standard Terms in the lease accounting process.

Prerequisites

In order to enter a Standard Term in the Terms and Conditions sub tab using the Terms and Conditions dialog box, the following information must have been completed:

• Information should be entered in the header and the General tab of the Lease Accounting Contract window.
• It is optional to have an amortization schedule created in the Amortization Schedule tab of the Lease Accounting Contract window. If the Standard Term is added as a modification to the lease contract it is required to have an amortization schedule in the aforementioned tab.
• Status of the lease contract should be in the status Preliminary.

System Effects

As a result of this activity, a new Standard Term is available for the lease accounting process.

Window

Lease Accounting Contract
Lease Contract Modification Detail

Related Window Descriptions

Lease Accounting Contract
Lease Terms and Conditions
Lease Accounting Contract/General
Lease Contract Modification Detail

Procedure

Use the following procedure to enter Standard Term for a lease contract:

1. Open Terms and Conditions sub tab in Lease Accounting Contract/General tab and create a new record to open Terms and Conditions dialog box.
2. Enter a description for the terms and conditions line in the Description field.
3. In the Category list, select the category Standard Terms.
   
   Note: Category of the Terms and Conditions represents payments that are agreed upon with the lessor in the lease agreement and that are used in the calculation of present value of minimum lease payments.
4. In the Type of Payment list, select the type of the periodical minimum lease payments agreed in the lease contract. This field is enabled if the Category is set to Standard Terms. The type of payments can be Fixed (i.e., the same payment amounts throughout the lease term) or Incremental (increased by a certain percentage or an amount from the first installment).
5. If the Type of Payment is set as Incremental in step 4, enter the appropriate values in the Incremental Percentage or Incremental Amount fields.
6. Enter the first installment amount of the periodical minimum lease payments in the Lease Amount field.
   
   Note: If the Type of Payment is Fixed, this amount will be the amount that is used for each installment amount.
   
   If the Type of Payment is Incremental, this amount will be increased by the given Incremental Percentage or Amount from the second installment on wards (Ex: If the Incremental Amount is Currency Units (CU) 2,000 and the Lease Amount of the first installment entered in this field is CU 10,000, the lease amount of the second installment would be CU 12,000, the lease amount of the third installment would be CU 14,000 and so on).
7. Enter fixed amounts that are included in the installment according to the lease agreement which are not considered for the calculation of the present value of minimum lease payments (PVMLP) in the Non-Lease Amount field, if applicable.
   
   Note: These amounts may represent payments for services, maintenance, or any other such fee. These amounts can be entered just for information purpose and will not be considered in any calculation or posting. Further, Non-Lease Amounts can be entered only for the Category, Standard Terms.
8. Enter the date on which the first periodical lease payment to be paid in the Payment Start Date field.
   
   Note: Payment Start Date should be a date greater than the Payment End Date of the already entered Terms and Conditions lines in the Category, Standard Terms.
9. Enter the frequency of the periodical lease payments to be made in the Payment Interval field. This should be defined in Months.
   
   Example: If the periodical lease payments to be made Yearly, enter 12 in this field. If it will be paid Quarterly, enter 3 in this field and so on.
   
   Note: You are not allowed to use different Payment Intervals within a period considered for percent value calculation.
10. Change the No of Lease Installments suggested by the system based on the Payment Start Date and the Contract End Date in the Header of the Lease Accounting window, if required. If you edit the value in this field, system calculates the Payment End Date automatically.
11. Click OK to save information.

Note: The same procedure can be carried out for multiple contracts from Lease Accounting Contracts window by selecting RMB option Modify Lease Contract.