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:

  1. Open Terms and Conditions sub tab in Lease Accounting/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. The possible values are as follows:
    1. 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.
    2. 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.
  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. 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).
  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.
    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 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.
  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.
  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.