Acquire Lease Asset

Explanation

This activity is used to terminate the lease contract by using the right mouse button option Acquire Lease Asset on the header or the General tab of the Lease Accounting Contract window.

Prerequisites

In order to terminate a lease contract, the following must have been completed:

• A fixed asset object of type Right-of-use must have been connected to the lease contract.
• Status of the lease contrat should be in the status Active.
• Lease Accounting Periodical Proposals must have been created and posted for the required accounting period(s) until the Termination Date.
• Lease Accounting Payable Proposals must have been created and posted for the installment(s) due until the Termination Date.
• If the Leasing Type of the contract is Finance, depreciation proposals must have been created and posted for the required accounting period(s) until the Termination Date.
• The Posting Types FAP 81, FAP 82, FAP 83, FAP 84, FAP 85, FAP 86, FAP 87, FAP 88, FAP 89, FAP 90, FAP 91 and FAP 92 must have been defined in Posting Control window.
• A voucher type with Function Group A must have been defined in Voucher Type window.
• If the Leasing Type of the contract is Operating and the contract currency is different to the accounting or parallel currency, the automatic termination postings cannot be created. For such contracts, the termination should be handled manually.

System Effects

As a result of this activity:

• Amounts are suggested for the Balances-Lease Liability, Balances-Right of Use Asset, Acquisition Information and Posting Information group boxes based on the given Termination Date.
  
  The calculations and values in each group box are explained below.
  
  Balances-Lease Liability
  The lease liability balance in contract, accounting and parallel currency of the lease contract by the termination date are shown in this group box. The values are not editable.
  
  Balances-Right of Use Asset
  
  Acquisition: The balances of the right of use asset in accounting and parallel currency by the termination date are shown in the Acquisition sub group box. The values are not editable.
  
  Depreciation/Amortization: The accumulated depreciation/amortization balances of the right of use asset in accounting and parallel currency by the termination date are shown in Depreciation/Amortization sub group box.
  If the Leasing Type of the lease contract is Finance, these fields show the accumulated depreciation balances in accounting and parallel currency based on the book specified in the Book ID field. If the Leasing Type of the lease contract is Operating, these fields show the balances of the Periodical ROU Asset- Amortization in accounting/parallel currency posted through the Lease Periodical Accounting Proposal(s) for the respective lease contract. The values are not editable.
  
  Net Book Value (NBV): The net book values of the right of use asset in accounting and parallel currency are shown in Net Book Value sub group box. These values are the respective acquisition values in accounting/parallel currency minus respective accumulated depreciation/amortization balances in accounting/parallel currency. The values are not editable.
  
  Acquisition Information
  The information relating to the asset that will be considered as a normal fixed asset thereafter can be entered in the fields of this group box.
  Further, the Purchase Price to be paid for acquiring the lease asset can also be defined. This should be defined only when the purchase price is not included in the terms and conditions as a One-Time Payment in calculating the present value of minimum lease payments.
  
  Posting Information
  
  Currency Differences – Gain/(Loss): The total realized currency gains or losses pertaining to the lease liability in accounting and parallel currency by the termination date are shown in this field. This happens in foreign currency contracts where the Recognition Postings are created at one rate and the Lease Accounting Proposals are created at different rates. In such instances, when calculating the currency gains/losses, the lease liability is re-calculated at the accounting/parallel currency rates prevailed when creating the Recognition Postings. Then the difference between the actual lease liability balance (shown in the Balances-Lease Liability group box) and such re-calculated lease liability balance is considered as a Currency Difference- Gain/(Loss) in the Acquire Lease Asset window.
  
  Acquisition – Adjustment Value: The value that is required to be adjusted for the acquisition value of the new asset in accounting/parallel currency. This is applicable only when using the right mouse button option Acquire Lease Asset.
  The value is calculated as the difference between the purchase price in accounting/parallel currency and the lease liability in accounting/parallel currency adjusted for the respective currency differences.
  
  Example:
  
  The values (hypothetical) given in the following example are in accounting currency only and the same is applied for parallel currency.
  
  Lease Liability: CU 1250 (A)
  
  Right of Use Asset - Acquisition: CU 1000 (B)
  
  Right of Use Asset - Depreciation/Amortization: CU 600 (C)
  
  Right of Use Asset - NBV: D = B - C
  = (1000-600)
  = CU 400 (D)
  
  Currency Differences – Gain (Loss): CU –250 (E)
  
  Purchase Price (in Accounting Currency): CU 2200 (F)
  
  Acquisition – Adjustment Value: G = F - (A - (E))
  = 2200 - (1250 - (-250))
  = 2200 - 1500
  = CU 700
  
  The CU 700 will be adjusted to the acquisition value of the new asset through a new posting type FAP 91 with a counter posting to a new posting type FAP 92.
  
  Note: If the calculated Adjustment - Acquisition Value is a negative value, the maximum value that can be adjusted is limited to the Net Book Value (NBV) to be transferred from the right of use asset to the new asset. So, in the above example, if the Adjustment - Acquisition Value is calculated as CU -700, the maximum value that can be adjusted to the new asset is limited to CU -400. That is, up to the NBV of the asset. So, the Adjustment - Acquisition Value is suggested as CU-400 and the remaining CU -300 is considered as a Termination Gain.
  
  Termination Gain/(Loss): In this instance, a value is shown in this group box only if there is an excess negative Adjustment - Acquisition Value (as explained in the above example) in accounting currency over the Net Book Value of the right of use asset in accounting currency. Such gain is posted using the posting types FAP 83 and FAP 84 (Counter Posting) as similar to when terminating a lease contract.
• Voucher(s) is/are created and transferred to the hold table in IFS/Accounting Rules.
  
  When acquiring a lease asset, the NBV of the existing right of use asset should be transferred to the acquired asset. Also, the difference between the purchase price in accounting/parallel currency and the lease liability in accounting/parallel currency adjusted for the respective currency differences is considered as an adjustment to the acquisition value of the acquired asset. A summary of the postings in Acquire Lease Asset is explained below using the values in the example explained above.

* FAP 82 posting type is created instead of FAP 0 posting type, if the Leasing Type is Operating in Lease Accounting Contract/General tab. In such instances, the acquisition value of the new asset is adjusted by the respective amortization amount when transferring the values to the new asset.
** If there is a gain from currency differences, FAP 87 and FAP 88 will be created.
*** The purchase price to be paid to acquire the asset is transferred to the same posting type (FAP 76) that is used to account for the installments due when running the Lease Payable Accounting Proposals.
****The adjustment – acquisition value is posted according to the posting control set up. This could be mapped to a new acquisition account, if required. But, the transferred acquisition value from the old asset is always posted to the account/code parts that have been used for the right-of-use asset. Therefore, it is recommended to use right mouse button option Move Object on Termination/Acquisition Details window or on Object window to transfer the balances to appropriate accounts/code parts (including the Object Group) before starting the depreciation on the acquired asset.

• The status of the lease contract is set to Closed and the status of the connected FA object status is set to Replaced. Further, the object status of the new object is set to Active.

Window

Lease Accounting Contract
Lease Accounting Contracts

Related Window Descriptions

Lease Accounting Contract
Lease Accounting Contracts
Termination/Acquisition Details

Procedure

Use the following procedure to acquire lease asset:

1. Open the Lease Accounting Contract window and search for the lease contract of which you want to acquire the lease asset.
2. Select right mouse button option Acquire Lease Asset on the header or the General tab of the Lease Accounting Contract window to open the Acquire Lease Asset window.
3. Modify the termination date suggested by default if necessary.
4. Use the List of Values and enter a termination reason of the lease contract. Termination reasons should be defined of the type Disposal Reasons in the Transaction Reasons window in order to use in this field.
5. Modify the posting information entered by default in the Voucher Information group box if necessary.
6. If the Leasing Type is Finance in Lease Accounting Contract/General tab, modify the default Book ID in the Balances – Right of use Asset group box if necessary. The postings relating to the termination/acquisition of lease asset will be displayed/created based on the book ID selected in this field only.
7. Enter/modify the acquisition information such as New Object ID and Description, Object Type, Valid From/To dates in Acquisition Information group box.
   Note: All the other object information such as the object group and the values entered in the Books tab are copied from the old object to the new object. If required to change the object group and the values of the new object, right mouse button option Move Object on Termination/Acquisition Details window or on Object window should be used.
   
8. Select the Define Purchase Price check box and enter purchase price in Contract Currency if there is a price to be paid to acquire the lease asset. This should be defined only when the purchase price is not included in the terms and conditions as a One-Time Payment in calculating the present value of minimum lease payments.
   
9. Make sure that the values suggested in the Posting Information group box is correct.
   
10. Save the information to create the automatic postings.
11. Alternatively, you can also acquire a lease asset from the Lease Accounting Contracts window.