Enter Terms and Conditions
Explanation
This activity is used to enter terms and conditions of a lease contract.
Prerequisites
In order to enter information in the Terms and Conditions
sub tab, the information must
have been entered in the header and the General tab of the
Lease Accounting Contract window.
System Effects
As a result of this activity, terms and conditions of the lease contract are available
for the Lease Accounting process.
Window
Lease Accounting
Contract
Related Window Descriptions
Lease Terms and Conditions
Lease Accounting Contract
Lease Accounting Contract/General
Procedure
Use the following procedure to enter terms and conditions for a lease contract:
- Open Terms and Conditions sub tab in
Lease Accounting/General tab and create a new record
to open Terms and Conditions dialog box.
- Enter a description for the terms and conditions line in the Description field.
- 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. The possible values are as follows:
- Standard Terms: This category represents periodical minimum lease payments (Fixed or Incremental).
It is the first Terms and Conditions line that must be defined. Once entered, the other category can be defined.
- One-Time Payment: This category represents payments such as exercise price of an option to purchase the underlying
asset, amounts payable under residual value guarantee or any expected termination penalties.
- 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).
- If the Type of Payment is set as Incremental in step 4, enter the appropriate values in the
Incremental Percentage or Incremental Amount fields.
- Enter the first installment amount of the periodical minimum lease payments in the
Lease Amount field.
This is a mandatory field irrespective of the Category.
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).
- 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.
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.
- Enter the date on which the first periodical lease payment to be paid in the
Payment Start Date field.
Note: Payment Start Date should not be equal to the
Contract Start Date in the Header
of the Lease Accounting window
if the Time of Payment in the General
tab of the Lease Accounting window is
End of the period. If the Time of Payment
is Beginning of the period, normally the Payment Start Date is equal to the
Contract Start Date.
- 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.
- 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.
- Click OK to save information.