This chapter covers the following topics:
When a lease or loan contract reaches the end of its term, a concurrent process automatically terminates the contract unless the contract was originally flagged as evergreen. In the case with evergreen contracts, the contract does not terminate and the billing continues beyond the contract's specified term. You can search for a terminated contract and view all of the undertaken steps.
When your customers make their payment to terminate a contract, you might have some differences between what your customers pay you and what your records indicate is due.
The OKL Small Balance Write-Off Tolerance rule determines whether or not to write-off or retain in Receivables any amounts due. The system administrator specified these profile option values during implementation.
The rule in the OKL Small Balance Write-Off Tolerance terminates the contract and:
Writes-off the balance if the balance on the contract is less than the amount in the rule.
Leaves the balance due in Receivables for collection if the balance in the contract is greater than the amount in the rule.
Methods of contract terminations include:
Natural end of contract termination through a batch process. See Batch Process Contract Termination.
Accepting a termination or restructure quote.
Ad hoc contract termination or request termination. This section covers ad hoc or request terminations.
The topics in this section include:
Search for Terminated Contracts
Request Termination
Batch Process Contract Termination
Impact of Terminating Linked Contracts
Termination requests are internal documents created to request the termination of a default contract. A request does not require acceptance, only approval. Upon approval, the contract is terminated and termination accounting transactions are posted.
When you select a quote type and quote reason associated with the template of type Request, a termination request is created. Based on the Request Type value defined in the associated termination template, the contract's outstanding receivables are treated as described below:
If Write Off is enabled, all termination quoted amounts including both termination billing and billed not paid amounts are written off. You must run the concurrent program, Process Termination Write-Offs.
If Reclass is enabled, invoices are created for all the written off amounts using the Billing Re-class Stream Type associated to the stream type being written off.
Note: The processing of termination request is always the same, irrespective of the value of the system option Stop Termination on Acceptance.
The system option, Termination Completion, is available under Setup: System Options: Operational Options, in Quoting Options under the Termination Options section. This system option is available only if the check box Stop Termination on Acceptance is selected. You can select one of the following values:
Standard: Termination completion occurs as described below:
Terminations With Purchase: Termination completes when the purchase price invoice line is fully paid in Oracle Receivables.
Terminations without Purchase: Termination completes when the asset return request status becomes Returned.
Custom: Termination occurs based on custom code where users select the transaction or event that should trigger termination completion for terminations with and without purchase. If Customis selected and no custom code is attached, termination takes place as soon as the termination quotes are accepted.
Use this procedure to locate contract terminations where the termination applies to the entire contract. This procedure locates ad hoc contract terminations. You can search for a terminated contract to view the status, check the progression of steps in the termination process, and check and resolve any error and omission messages.
None
Perform the following steps:
On the Termination Transactions page, enter one or more search criteria for the terminated contract:
Contract Number
Contract End Date: Click the Calendar icon and choose starting or ending dates.
Contract Status: Choices may include: Approved, Termination Hold, Reversed, Amended, Pending Approval, Litigation Hold, Passed, New, Incomplete, Under Revision, Booked, Entered, Terminated, Hold, Active, Canceled, and Evergreen.
Transaction Date: Click the Calendar icon and choose starting or ending dates.
Transaction Status: Choices include: Approved, Canceled, Closed, Entered, Error, Pending Customer Approval, Pending Internal Approvals, Processed, Rejected, Submitted, and Waiting.
Click the Go button.
In the Results area are the matching contracts.
Select the contract and click the termination transaction details of contract on the Termination Transaction page.
The Termination Transaction page shows you the contract number, contract status, start date, end date, transaction status, transaction date, termination reason, comments (that you can edit), steps of the termination process, and messages. You should review and resolve any error or omission messages.
The steps of termination process indicates the statuses of:
Validate Contract
Set To Evergreen
Cancel Insurance
Close Streams
Close Balances
Post Accounting Entries
Amortize Asset
Disposal of Asset
Use this procedure to select a contract for termination.
Certain processes--such as termination quote, restructure quote, request termination, and contract expiration batches--are based the contract status.
The following table shows supported combinations of the request termination process and contract statuses.
None
Perform the following steps using the Request Termination page:
In the Search area, specify any of the following search criteria to locate the contract that you want to terminate:
Contract Number
Contract Start Date: Click the Calendar icon and choose beginning or ending dates that the contract had started.
Contract End Date: Click the Calendar icon and choose beginning or ending dates that the contract was to have ended.
Click the Go button.
In the Results area, matching contracts appear.
In the Select column, select one or more contracts that you want to terminate.
Click the Terminate button.
You can verify the progress and status of the terminated contract by searching for it.
See Search for Terminated Contracts.
The system option, Adjust Billed Not Paid, determines whether Billed Not Paid line amounts are overridden on a termination quote or request, and, if that is the case, which types of billable streams are eligible for update. It is available as a check box under System Options: Operational Options, in Quoting Options under the Termination Options section. You can update Billed Not Paid quote lines based on the following values:
None: No system calculated Billed Not Paid amount is eligible for update.
Accruals Basis: Billed Not Paid line amounts associated to accrual basis stream types are eligible for overrides.
Cash Basis: Billed Not Paid line amounts associated to cash basis stream types are eligible for overrides.
All: All Billed Not Paid line amounts can be updated.
When override amounts are entered, adjustments are created in Oracle Receivables for the difference between the system calculated amount and the override amount when the termination process is completed.
Note: For Billed Not Paid amounts to be updated on a termination quote or request, the termination template line for Billed Not Paid must be selected for Overrides in the associated termination template as well.
You can define the following termination payment method details in the contract's billing Terms and Conditions:
Termination Payment Method
Termination Bank Account
These payment methods apply to the following:
Termination invoices created upon quote acceptance.
Any other invoices created after the termination is processed.
You can customize the logic for generating billing adjustments on termination with the system option Termination Billing Adjustments. Select from the following options:
Standard: This is the default value. Termination billing adjustments are generated based on the standard logic.
Custom: If this value is selected, standard billing adjustments are disabled and you must define a customized logic to create termination billing adjustments through an API enabler.
Invoiced Based: For termination processes, this system option can be used to apply credit memos directly to the invoice line.
The person with Lease Administrator login responsibility runs a batch process that searches for contracts that are ready for termination to formally terminate them. The batch process looks for termination dates up to the current date. Whereas some lessors might run this batch process daily, other lessors with smaller portfolios might run this batch weekly or less frequently.
Certain processes--such as termination quote, restructure quote, request termination, and contract expiration batches--are based the contract status.
The following table shows supported combinations of the batch process contract termination and contract statuses.
To run the batch for processing contract termination, the Lease Administrator accesses the Submit Request area.
The fixed purchase option is applicable to those lease scenarios where the contract runs its full life and the lessee opts to purchase the equipment for $1 or for a mutually agreed upon price when the contract terminates. Consequently, when you select the Automatically Process the Fixed Purchase Option check box in the End of Term Purchase Option region of the Terms and Conditions page, the following occurs when you run the Terminate Expired Contracts concurrent program:
The expired contract is automatically terminated.
An invoice transaction is automatically generated in Oracle Lease and Finance Management for the fixed price purchase option.
The equipment (asset) is sold to the lessee.
Fixed Assets is updated with the proceeds from the sale of the equipment, that is, the purchase option amount.
The asset is retired from Fixed Assets.
When you terminate an Oracle Lease and Finance Management lease or loan contract that is linked to a service contract in Oracle Service Contracts, the service contract is not automatically terminated. The linked service contract continues to be billed through Oracle Lease and Finance Management using the billing process defined in Consolidated Billing.
Terminate the service contract manually in Oracle Service Contracts.
When you terminate a service contract (in Oracle Service Contracts) that is linked to an Oracle Lease and Finance Management lease or loan contract, manually terminate the Oracle Lease and Finance Management lease or loan contract, if required.