This chapter covers the following topics:
Operating and program agreements define your rights and obligations when providing leasing services for vendors. You can define terms and conditions in these agreements to mitigate two primary sources of risk inherent in lease contracts: default on the payment stream and loss on the equipment’s residual value. You can define terms for vendor cure to minimize the risk of lessee default on payments and define vendor residual sharing terms to share the profit or loss on the residual to minimize residual value exposure.
To process residual profit or loss sharing with vendors, first create a program agreement with terms and conditions specifying how the profit or loss is calculated and shared with the vendor. Then during contract origination, assign the program agreement to the lease contract. When you remarket the asset, a Lease and Finance Management concurrent program calculates the profit or loss on the residual position and distributes the gain or loss to the vendor through Oracle Payables. The vendor can view his share of the residual profit or loss in Vendor Self Service. In addition, you can run a concurrent program to view residual sharing transactions.
The following table describes the Lease and Finance Management vendor residual sharing business process.
| Process Task | Description |
|---|---|
| Create Vendor and Program Agreement | You create the vendor in Oracle Purchasing and on the program agreement. |
| Create Custom Formula | Optionally, you can create a customized formula for calculating the vendor residual loss or gain. |
| Define Residual Sharing Terms | After you create a program agreement, select the vendor residual sharing formula and define the sharing percentages. |
| Assign Program Agreement to a Lease Contract | Create a lease contract under a program agreement. The lease contract product must include the vendor residual share stream type. |
| Remarket the Asset | Sell or scrap the asset. |
| Calculate the Residual Profit or Loss | Run the OKL Vendor Residual Sharing concurrent process to calculate the profit or loss. |
| Distribute the Profit of Loss through Oracle Payables | Account for the amount due to or from the vendor in Oracle Payables. |
| Run and Review the Residual Sharing Report | Generate the report OKL Report - Vendor Residual Share Report to review the results. |
| View Residual Sharing in Vendor Self Service | The vendor can view the sharing amounts in Vendor Self Service. |
To set up vendor residual sharing, see Set Up Vendor Residual Sharing, Oracle Lease Management Implementation Guide.
When you define the residual sharing terms on a program agreement, the terms apply to all contracts associated to that program agreement. The terms defined are the formula to use and the sharing percentages. You can define residual sharing percentages for multiple vendors in a program agreement.
To define residual sharing terms, use the Program Agreements details page of the applicable program agreement. Select Term Sets.
The Vendor Gain/Loss Residual Share Term Set is defaulted to the program agreement. Click the update icon for the Vendor Gain/Loss Residual Share Term Set.
In the Vendor Residual Share page, select the formula in the Residual Formula field. If no formula is selected by the user, Lease and Finance Management will use the seeded formula, Vendor Residual Share. You can add a row and select the vendor name in the Party Name column. Enter the residual share percentage for each party, including your share. The total of the residual percentages for all vendors and the lessor must equal 100%. Click Apply.
After you remarket or dispose of assets, run the Vendor Residual Sharing concurrent program. Lease and Finance Management uses the seeded or user-defined formula and the vendor share percentages to calculate each vendor’s share of the profit or loss. Lease and Finance Management then accounts for the liability to the vendor and either processes a disbursement or a debit memo to the vendor through Oracle Payables. To calculate, account for, and process vendor residual sharing, complete the following tasks.
Run the Vendor Residual Sharing Concurrent Program
Review Vendor Residual Sharing Report
In the Lease and Finance Management Processing tab, run the concurrent program Vendor Residual Sharing to calculate the vendor residual sharing amounts to be shared by each vendor. This concurrent program uses the residual sharing formula defined on the program agreement to calculate the vendor share and create an Oracle Payables transaction for the amount due to each vendor. Amounts due from vendors are treated as a debit memo. All disbursement transactions are processed through Oracle Payables, which allows the netting of debit memos against other liabilities to the vendor.
After calculating the sharing amount, run the concurrent program, OKL Report- Vendor Residual Share Report to report the sharing obligations for each asset. This report displays the program agreement number, contract number, asset number, asset termination and disposition dates, and the sharing amounts for each asset.
Vendors can view the residual sharing results in Vendor Self Service, including Asset Number, Program Agreement Number, Asset Termination Date, Asset Disposition Date, and Vendor Share.