New functionality - Fixed Assets for Leases
Now you can have specific Lease Categories to be accounted for through Standard Fixed Assets functionality (Right-of-Use part). By utilizing Fixed Assets calculation for depreciation (Straight Line method in accordance of IFRS16).
Here is what would be different in your system:
Activation
To use Fixed Assets for Leases instead of Right-of-Use Schedule you would need to complete FA Setup.
If you are currently migrating leases then please refer to Migration with Existing FA.
If it is new/migrating lease and Fixed Asset is not within system then you would fill in lease as usual. Depending on Category, during Signing action (Only from Card) a new Fixed asset card will be created depending on information filled in within Lease Agreement.
On signing "Fixed Asset No." is filled in Lease Agreement card. Corresponding Fixed Asset's field "Lease No." is also filled for link between the two.
After signing you can open up Lease Agreement for any modification to be done. FA is refreshed also during Activation of Lease Agreement.
After signing if you would like to check how FA would calculate depreciation you can see it on RoU projection. All calculations are done by standard Fixed Asset Depreciation calculations.
Before Activating
If you would like to use Fixed Assets' calculation of depreciation to use 365 Fiscal Year calculation you need to do that before first month posting. It is changed in Depreciation Books page -> LEASE book -> Fiscal year 365 Days.
And Recalculate lease.
Now you can activate lease as usual and Cost for RoU will be posted in usual Lease Categories G/L account and same amount would get registered as Acquisition Cost within Fixed Asset Entries.
FA entries
For quick access to Fixed Ledger Entries use Related actions
For quick access to FA Card use Projection:
For fields
FA description is filled from Asset Description or just Description field if Asset desc. is empty
Postings
Posting do not change whatsoever. Still done through RoleCenter -> Monthly process -> Post to G/L.
With added bonus of Depreciation posting in our Fixed Assets.
Modifications
Modifications done on lease are done the same way. It would calculate a remeasurement for leases.
In Fixed Asset posting, depending on sign (+,-) it will be posted either as: Appreciation (increase) or Write-Down (decrease).
Two examples:
- Price increase from 1000 to 1200
- Term lowered from 36 months to 24 months
Expiration
During expiration no additional entries are posted for Fixed Asset.
Expiration makes FA Inactive.
Future change planned
On expiration Disposal entries would also be created for Fixed Asset, reversing Acquisition (also Appreciation and Write-Down) and Depreciation amounts.
Termination
Termination happens same as before with Terminate Lease action.
What entries are created in FA Ledger entries:
Reversed all transactions done: acquisition, depreciation, write-downs,appreciations.
Gain/Loss is calculated as per usual from RoU balance and Liability balance difference.
Reversal
Same as without FA.
Additionally in "FA ledger entries" entries with reverse sign to cancel out and marking those lines with "Reversed" flag are created.
Reversal on Termination/Expiration
To use Reverse Termination/Expiration.
Reverse entries would be created for Terminated posting that were attached to G/L entries.
To Change
Also reverse Proceeds on Disposal. Current oldest BC version does not allow.