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Oracle Lease and Finance Management User's Guide
Release 12.1
Part Number E13583-05
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Contract Revisions

This chapter covers the following topics:

Contract Revisions Overview

When a contract is booked, Leasing and Finance Management calls the accounting engine to create balance sheet entries for the assets on a lease. Depending on the book classification, the lease contract is an asset in the form of expected receivables or leased assets. Each period some of the assets are amortized as they generate revenue and incur expense. These entries are reported through a company's income statements.

When the receivable or asset values change, the balance sheet accounts must be updated. Depending on when the changes occurred, the revenues and expenses recognized may also require adjustments. All adjustments must happen in the same accounting period or the balance sheet will be incorrect. The process of making these adjustments is called rebooking.

If financial information does not change, you can make small revisions to a contract without rebooking the contract. After you have booked a contract, however, you cannot change the financial terms of the contract without making a contract revision and going through the Rebook process.

Rebooking Overview

Rebooking is the process of altering an existing lease/loan transaction due to some financial change in the deal structure, rental payment change, credit extension, due date change, etc. New accounting entries or adjusting entries are made when the contract is reactivated.

Leasing and Finance Management supports the following two types of rebooking:

Rebooking Requirements

If you make adjustments to a contract that effect such factors as depreciation, rent, overall cost, or residual value, you must perform the complete, two-part Revision and Rebook process. Non-financial contract revisions, such as billing set ups, do not require rebooking. Asset splits and contract reversal do not involve stream generation and do not require rebooking.

Revisions that require changes to journal entries require the complete Rebook process.

Note: When you revise a contract using the online rebook method, you cannot change the contract currency, and some other types of information. In addition, although it may appear that you can edit all fields, not all edits are copied back into the rebooked contract version. Mass rebooks are done through controlled processes that require specific inputs for changed values.

Rebooking is required for any change impacting the following:

Revising a Contract

The first part of contract revisions is to initiate a revision from the Revisions pages.

Prerequisites

You must have a booked contract. Some types of contract revisions have further prerequisites, for example:

Steps

Perform the following steps for contract revisions in the Revise Contract page.

  1. Search for booked contracts in the Contract Search page.

  2. In the search results table, select Revise in the Action column for the applicable booked contract and click Go.

    The Revise Contract page opens.

  3. Select one of the following reason types:

  4. Select a Reason, and the date you want the revision to take effect, from the lists of values. Possible reasons include: Adjust Cost, Adjust Depreciation, Adjust Rent, or Adjust Residual Value; Change in Due Date or Start Date; Customer Change, Extend Term; Principal Paydown, Product Change, Split Asset; and Other. The Properties, Yields, and Streams details of the contract appear as read-only fields.

    Note: The Customer Change reason code is used by the Transfer and Assumption process, which allows you to change customer-related information on the contract, such as Customer Name, Bill-To Address, etc. For more information, see Transfer and Assumption below.

  5. Select or enter the Revision Date. (It must be after the Rebook Limit date of the original contract.)

    Note: The Revision Date is used as the in-service date for new asset lines added during rebook. It is also used as the transaction date for any rebook-related adjustments and is the effective date of any contract transfer for customer change or product change.

    While revising a contract with a late interest date, ensure that the contract revision date is earlier than the late interest date.

Online Rebook

Online Rebook Overview

Online rebook is the process of manually rebooking a contract. During online rebooking, when you click Rebook, a copy of the contract is created with the contract number containing the rebook extension. The original contract remains active and in effect during the editing of the copy. Once you activate the contract copy, fields that can be edited, along with streams and yields, are copied from the rebooked contract copy to a new version of the original contract. The contract copy is assigned the status Abandoned and is no longer usable. Copies can be abandoned if rebooking is not to be completed. When you book the copy contract, the original contract is versioned.

The following table shows what online rebooking changes are permitted in Leasing and Finance Management.

Allowed Not Allowed
Term extension Term reduction
Add parties Customer or customer account
Changes to payments (asset, fee, service) New services or service changes
Changes to assets from the start date, including depreciation changes New usages or changes to usages
New assets (ending at the same time as the contract term end) Changes to covered assets
New fees Changes to fees (except for General fees)
Non-financial changes, such as terms and conditions, or asset details  

Online Rebook Accounting

Dates in Rebook Accounting

When booking a new version of a contract, the rebooking transaction date is used to determine the General Ledger date. Contracts can be rebooked for closed periods. For transaction dates in closed periods, Leasing and Finance Management finds the open period closest to the transaction date and posts entries for that period.

Changing start dates during a rebook is permitted in the following situations:

The rebook limit date cannot be updated after booking, and does not change as a result of the rebook.

Writedown Residual Value and Salvage Value Update in Rebook

During an online rebook, the Residual Value can be updated using the Contracts Revision page. The user can writedown the Residual Value by a percentage or a fixed amount. The rebook process will update the contract with the new Residual Value.

Residual Value can also be updated using the Residual Value Writedown page under the Assets - Transactions Tab. The user can writedown the Residual Value by a percentage or a fixed amount. To process the Residual Value transaction, the Process Residual Value Writedown transactions program should be run. The Process Residual Value Writedown transactions program calls Mass Rebook which updates the contract with the new Residual Value.

An online rebook or mass rebook does not update the Salvage Value on the contract.

Rebook and Insurance

When a rebook is activated, the insurance policy program cancels the existing policy and creates a new policy based on the new contract values. No other programs are required.

In a scenario where you have a contact with a 24 month term and a corresponding insurance policy for 24 months, and you rebook the contract for a 36 month term, the new insurance policy will also include the new 36 month term. Leasing and Finance Management will refund any unused premiums and bill for new premiums.

During a full termination, the rebook process cancels insurance policies. No new policy is created. When a policy is canceled, Leasing and Finance Management processes the accrual, billing, and disbursement adjustments.

The insurance policy is calculated at the assets level to determine a single premium amount for all assets on a contract. The policy details are stored on a contract line that references the contract header. When the policy is canceled during a rebook, the amount paid by the lessee is compared to the number of months of past coverage. Credit is calculated for the remaining number of months that were paid but not used. A credit memo is created for that amount.

After the rebook is complete, a new policy is created using the revised value for the assets to determine a new premium. The premium is calculated on a quote (as for a new contract) at the asset level and then summed to a total for the quote. A policy is then created and activated from the quote automatically. The premium amount is billed on an invoice. You can then apply the credit memo for the cancelled policy to that invoice.

Rebook Adjustments

Online rebook calculates and generates adjustment entries for already billed and accrued streams on the rebooking date. The adjustment is based on the following information:

These dates identify the total amount actually billed or accrued versus the total amount that should have been billed or accrued. This process is run for each billed stream type prior to rebooking. The difference between these two amounts is used to calculate adjustments.

Online Rebooking Procedure

Rebook online using the Revise Contracts page. The following steps outline the online rebooking process:

The following table describes parameters for online booking.

Fields That Can Be Updated Description
Contract Header The following contract details fields can be updated:
  • Term and Effective Date

  • Contract Description

  • Purchase Order Number

  • Acceptance Method

  • Bill to Address

  • Expected Delivery Date

  • Acceptance Date

  • Date Signed

  • Rebook Limit Date

  • Private Activity Bond

Parties You can create a new party and enter their billing information. You cannot update or remove current parties.
Asset You can create new assets, but you cannot remove current assets.
The following fields can be updated for assets:
  • Unit Cost

  • Unit

  • Asset Book Depreciation

  • Book Salvage Value

  • Book Cost

  • Book Method

  • Book Life in months

  • Book Rate Percentage

  • Residual Percentage

  • Residual Amount

  • Asset Tax Depreciation

  • Tax Method

  • Tax Life in months

  • Tax Rate Percentage

  • Tax Cost

Fees You can add, update, and remove fee types and associate assets to all fee types, except the General fee type. For example, you can add a new asset during rebook and may want to include it as a covered asset on an existing fee type or new fee type.
Payment You can create and remove payments.
The following payment fields can be updated:
  • Number of Advanced Payments

  • Frequency

  • Arrears

  • Sequence

  • Start Date

  • Payment Amount

  • Periods

Subsidy The following subsidy fields can be updated:
  • Party

  • Override Amount

  • Party Refund Details

    Note: To credit the subsidy through a credit memo, you must specify the bank account associated with the lease vendor for the contract. To refund subsidy through payables, based on the subsidy set up for Recourse/Transfer Basis, ensure that you have selected the appropriate pay site while associating the subsidy to the asset.

  • Stub Days

  • Stub Amount

Effective Dated Rebook

Effective Dated Rebook Overview

When the financial elements of a contract are modified due to changing conditions that result in revisions agreed to by both customer and lessor, or due to errors while authoring a contract, the resulting changes in income and expense must be spread over the remaining term of a contract. Oracle Lease and Finance Management’s accounting processes with Effective Dated Rebook allow you to spread the financial impact of contract revisions from the effective date of change over the remaining term only. Effective Dated Rebook contract changes have no impact on prior accounting periods.

When a contract is rebooked, you can make the proper accounting adjustments, including the ability to spread the financial impact of the contract revisions over the remaining contract term, using Effective Dated Rebook. When utilized, Effective Dated Rebook ensures that income adjustments due to contract revisions are not recalculated and adjusted for periods prior to the effective date of the revision. Accounting for income adjustments is recognized from the effective revision date through the remaining contract term only.

This enables you to automatically apply your accounting policies with no impact on contract changes to prior or current accounting periods. Contract changes for floating rate contracts, principal paydowns, and restructures are prospective.

Effective Dated Rebook applies to standard income and expense streams in both Internal and External Pricing engines.

The Effective Dated Rebook option fulfills the following business needs:

Effective Dated Rebook is provided in the following revision processes:

Effective Dated Rebook Setup

To enable Effective Dated Rebook, you must set the Amortize Income Adjustments From Revision Date system option to Yes at the Business Unit level. Once this option is set to Yes, it cannot be changed.

For external pricing engines, upgrade must be performed for existing contracts if the Amortize Income Adjustments from Revision Date system option is set to Yes. When set to Yes, a contract revision can only be performed after the contract is upgraded.

Upgrades are performed by the following methods:

Effective Dated Rebook Concurrent Program

For external pricing engines, you can upgrade existing contracts by running the Effective Dated Rebook Upgrade concurrent program in a Review or Submit mode. The Review mode enables you to see contracts eligible for upgrade before running the upgrade.

You can select contracts to upgrade based on one of the following criteria sets:

Reverse a Booked Contract

Reversing a contract cancels the accounting entries created by booking and funding, and effectively ends a contract. Reversing a contract is not possible if you have already run billing and accrual, but you can reverse if the contract has been funded. This process does not reverse entries in Oracle Assets

Prerequisites

A contract must be Booked before it is reversed. However, it cannot be billed or have any other transactions, except Funding, before it is reversed.

A contract may be Funded before it is reversed. In reversing, Leasing and Finance Management will automatically adjust its funding transactions.

Steps

View Contracts Under Revision

This is a view-only function that allows you to look at various contracts that are currently under revision. On the Revisions page, click Under Revisions. The Revisions in Progress page opens.

Click the copy contract or contract that you want to view.

To cancel a revision, select the check box next to the copy contract number and click Abandon.

Split Asset

Split Asset Overview

If you need to split an asset line into multiple asset lines, you can perform the Split Asset task. Because this activity does not have a financial impact on the contract, the status of the original contract never changes, and no rebook is performed. Split assets can also be created for assets off of a contract.

You can split an asset line either by units or by components. When you split an asset line by units, you can choose to split the asset line either into individual units, or to split the original number of units into two parts. For example, you can split an asset line with 10 units into 10 asset lines, each containing one unit, or you could split the asset line into two asset lines, one with 4 units, the other with 6 units.

When you split an asset line into components, you split an asset by value rather than number of units. In this case, you select new items that are components of the original asset; and for each component item, select a percentage of the total value. The number of units of each new item is the same as the number of units of the original asset. You must register the new items in Oracle Inventory before you can select them.

For example, your original asset line consists of 5 units of a Desktop PC, total cost $6000. The PC consists of two components, PC Base and PC Monitor.

When you split by components, the following conditions apply:

Steps

Perform the following steps on the Revise Contract page to split assets:

  1. Search for booked contracts in the Contract Search page.

  2. In the search results table, select Revise in the Action column for the applicable booked contract and click Go.

    The Revise Contract page opens.

  3. Select the applicable revision type to split assets into components or units.

  4. Enter the Revision Date for the Split. The date must fall within the contract term.

  5. Select the asset to split. The asset's description, number of units, and cost appear.

  6. If you have selected Split Asset into Components as the revision type, then click Go. If you have selected Split Asset into Units, then provide the following details and click Go:

  7. The Contract Details page opens.

  8. Click Apply.

    The Split Asset revision process completes. You do not need to run Billing programs.

Associate and Delink a Service

Before you revise linked service and lease contracts, you must first delink them.

With the lease contract in context, on the Revise contract page, select Associate a Service as the revision type and click Go. The Associate Service Contract page appears, displaying the lease contract, the associated service contract, and the Supplier/Vendor.

  1. Click Delink.

    Delink stops service contract billing in Oracle Leasing and Finance Management and reestablishes service contract billing in Oracle Service Contracts through the accounts receivable interface to Oracle Receivables.

  2. Revise the lease contract, if necessary, by following the steps described through Online Rebook.

  3. Revise the service contract, if necessary, in Oracle Service Contracts.

  4. If you do not want to generate consolidated lease and service contract invoices, do not link the revised contracts. Run the Oracle Service Contracts billing process and the Leasing and Finance Management Billing process independently.

  5. If you want to generate consolidated lease and service contract invoices, follow the steps to link service contracts (see Set Up Service Lines). Linking the lease and service contracts automatically disables the interface between Oracle Service Contracts and Oracle Receivables, and consolidates the lease and service contract billing through Oracle Leasing and Finance Management.

  6. Run the Oracle Service Contracts billing. Run the Oracle Leasing and Finance Management billing processes.

Mass Rebook

Mass Rebook Overview

Mass Rebook is the process of rebooking multiple contracts. Mass rebook allows you to search for contracts by combining certain parameters with operands to identify the contracts you want to rebook. You can subsequently change certain aspects of the contract through the same process. The rebooked contracts keep their original contract numbers.

Mass rebooking is also used in partial terminations and variable rate changes. Functionally, the results are identical to those of online rebooking, but in mass rebook no contract copy is created. Also, mass rebook further limits the parameters you can change on a contract and rebook.

The mass rebook process consists of the following two steps:

Mass Rebook Selection Criteria

Parameters you may use to select contracts that you want to mass rebook include:

You can narrow the search by using operands such as "LIKE", "BETWEEN", "=", and "<>" . There are two Criteria Value columns where you can enter criteria for your search, and another column for a specific Set Value.The Set Value will be the new value assigned to each contract in the batch during rebooking. For example, if you want to select a set of contracts that have start dates that fall within the range of a particular month, you can modify the search in the following manner:

Example of Mass Rebook Page
Criteria Operand Criteria From Criteria To Set Value
Contract Start Date BETWEEN 01-May-2004 30-MAY-2004          -        

Categories That Can Be Modified

There are four aspects of contracts that you can use the mass rebook functionality to change:

You can use the categories Depreciation Method and Date Placed In Service for both selecting which contracts to rebook, and also as entries to change during the mass rebooking.

Mass rebook revisions are typically a two-step process where you first create a batch request by using specified criteria to identify the contracts you want to rebook. Then you run the rebook request for all the contracts your criteria search has identified. You can specify those contracts from the list that you want to include in the mass rebook.

Note: All operands are case sensitive; use UPPERCASE, only.

Prerequisites

You must have booked contracts.

Creating Mass Rebook

Steps to Create Mass Rebook

Perform the following steps in the Mass Rebook page:

  1. Click Create to create a new mass rebook request.

    The Create Mass Rebook page opens where you enter your search criteria and the changes you want to make to the contracts that you are rebooking.

  2. Enter the request number. The number can be any alpha-numeric combination you want. You can subsequently access the request using this number.

  3. Specify the criteria you want to use to group your contracts for mass rebooking.

  4. Click Next to update the contracts.

    The Selected Contracts page appears. This page displays all the contracts that your request returned, based on your criteria.

  5. Click Apply.

View Requests

From the Mass Rebook main page, you can search for previous requests by entering the request number.

You cannot edit any requests already submitted, because there may be processing already occurring against the contracts included in the mass rebook request.

Transfer and Assumption

The Transfer and Assumption process in Lease and Finance Management can have two main steps:

1. Optionally, create a Transfer and Assumption Request in the Lease Center and have it approved through workflows. This feature allows a customer service agent to ask for and enter the new customer and contract details, which are carried through to the next step: the actual transfer and assumption processing that creates the new contract.

The agent can initiate a request for a partial transfer and assumption; that is, for transferring only some of the asset lines onto a new contract. In the Lease Center Transfer and Assumption Request form, the agent can separate the asset lines into Assets on Original Contract and Assets on New Contract.

2. Required: Perform a manual Contract Revision. A contract administrator must re-lease the contract for the new customer. After the new contract is activated (booked), the older contract is automatically terminated or rebooked in the case of a partial transfer.

You can skip the Lease Center request and workflows, and start the transfer and assumption process by making the changes in customer details and assets manually using contract revision.

Transfer and Assumptions that begin here in the primary Lease and Finance Management interface, rather than in the Lease Center customer service view, must be Complete (Full); that is, all the asset lines are transferred.

In Contract Origination, select the old contract.

If there is a Transfer and Assumption Request from the Lease Center in status Processed (passed all approvals), search and select the request number. If there is an approved request, all the details from the request pre-populate the corresponding fields in the subsequent steps.

Select Revise as the action.

In the Revise Contract page, select Customer Change as the revision type. The Customer Change revision type allows you to modify the customer details on the contract details pages.

You can initiate the Re-lease process for the Customer Change or Product Change revision types only. Product Change would mean a change in the lease financial product; for example, from a direct finance lease to an operating lease.

Enter the revision date and select the Transfer and Assumption request.

Click Go. This prepares the contract revision processes to create a new contract for Transfer and Assumption. A message confirms success and directs you to the next step.

In the Contract details page select the original (old) contract to view it, or view and modify customer details on the copy (new) contract in the Contract page.

The new contract number is system-generated, retaining the old contract number with a suffix “REL” (for Re-lease). You can modify the system-generated number before you book the new contract; for example, you can delete the “-REL”.

If the Transfer and Assumption request referenced on the revision has a contract number already specified, the new contract is generated with the specified contract number.

Modify the new contract. The fields that you can change on the new contract include:

Fields that are automatically adjusted on the new contract after it is booked include:

Lien information for assets on the old contract is not carried over to the new contract. Add lien information manually on Assets pages before booking the new contract, or you can add it later in the Lease Center after the new contract is booked.

Activate (book) the new contract.

Re-Lease Contract

Upon booking the new contract, if the Transfer Type is Complete (Full), Lease and Finance Management terminates the old contract automatically. If the Transfer Type is Partial, the old contract is rebooked automatically with the remaining assets.

When the assets are transferred, the credit line is adjusted. The Credit Line Details screen displays Total Transfers and Total Net Transfers.

Any subsidies on the old contract are processed based on the Subsidies Setup parameter, Transfer Basis: Acceleration (the subsidy is accelerated to the contract end) or Refund (the subsidy amount from the termination date to the contract end date is refunded to the vendor). You must add subsidies manually to the new contract.

As part of the termination processes of the original contract, Lease and Finance Management determines the amounts to be accrued up to the termination date for all accrual streams with the actual amounts. Any difference is adjusted.