This chapter covers the following topics:
You can create renewal quotes in order to generate a quote to a lessee that specifies any payments associated with the renewal of the original base term of the contract into a fixed renewal period.
Renewal Quotes enable you to perform the following tasks:
Specify which assets from the original contract will be quoted for the fixed period renewal. When selecting the assets to include, you can filter the list of assets on multiple criteria, including Serial Number.
Update each asset value to write up or down the cost of the asset for the renewal period from its current net investment value. Any change in amount results in a gain/loss upon renewal.
Specify a new residual value for each asset.
Change the financial product (lease classification) associated to the fixed renewal term.
View the quote results without navigation and drilldowns.
Add new fees or services to the quote or copy selected fees and services from the base term contract. New period fees contribute to the renewal quote Internal Rate of Return yield calculation during pricing.
The following conditions apply to Renewal Quotes:
Only the original customer during the base term can receive the quote, and the customer cannot be changed during the renewal process.
No new assets can be added to a renewal quote, only the assets from the existing end of term contract to be renewed.
The start date of the renewal period is the day after the original contract end of term. There can be no gaps between the Effective From and To dates.
The asset categories and depreciation values of the assets cannot be altered during renewal quoting and processing.
You cannot include assets in a renewal quote that are already accepted and not canceled on any other type of quote.
Renewal quotes cannot be created for contracts that are in Evergreen status. You will have to terminate the assets and re-lease them onto a new contract manually.
Renewal quotes cannot be created for contracts with assets in an investor pool that is securitized for the residual value. The contract must be bought out of the pool in order to renew. Contracts in a pool for receivables securitization can be renewed.
The following list outlines the Renewal Quote process:
Search for and Update Renewal Quotes
Create Renewal Quote
Update Renewal Quote
Approve Renewal Quotes
Accept Renewal Quotes
Duplicate Renewal Quotes
Cancel Renewal Quotes
View Renewal Quotes
Consolidate Renewal Quotes
Implement an Accepted Renewal Quote
When you search for individual renewal quotes for a contract from the dropdown menu on each contract row on the Search Results table, you are directed to the Contract Modifications page. From the Renewal Quotes sub-tab, you can search for renewal quotes associated to a contract by using the following criteria:
Quote Number
Quote Status
By clicking Go without entering any search criteria, all of the renewal quotes for a contract will be displayed.
The following table shows describes renewal quote fields.
| Field | Description |
|---|---|
| Quote Number | The individual renewal quote number. Read-only. |
| Description | Description entered for the renewal quote. |
| Pricing Method | Selected by user for each individual renewal quote. |
| Status | Individual renewal quote status |
| Valid From | Date renewal quote is valid from |
| Valid To | Date renewal quote is valid to |
| Term | The term proposed on the quote for the renewal contract. |
| Submit | The Submit button enables you to submit the renewal quote for approval. |
| Accept | The Accept button enables you to mark an individual renewal quote as accepted. |
| Cancel | The Cancel button enables you to cancel the individual quote. |
To create a renewal quote, select Create Renewal Quote button from the search summary and enter the renewal quote details. You can create two types of renewal quotes:
Fixed Term Renewals
Refinance
After the renewal quote details are entered, you can select the assets to include in the renewal quote. Save and Apply your updates.
Additional Information: You can only create new Renewal Quotes for Financial Products with the following Book Classifications: Operating Lease or Direct Financial Lease. And only contracts with the following status are available: Booked or Expired (only for asset lines where the asset return request is Scheduled).
The following table describes renewal quote details:
| Field | Description |
|---|---|
| Operating Unit | The Operating Unit is a mandatory field. |
| Contract Number | A read-only field displaying the contract number. |
| Contract Template | Displays all contract templates for a product. |
| Quote Type | The type of renewal to be quoted for the selected contract. |
| Termination Type | The type of termination to be quoted in the renewal quote. |
| Expected Start Date | Must be entered, and is always one day after the End of Term Date of the existing contract. |
| Valid From | The earliest date when the renewal quote may be accepted. |
| Valid To | The latest date when the renewal quote may be accepted. |
| Renewal Term | The number of months in the renewal term to be quoted must be entered. |
| Product | This product is defaulted from the existing contract, but you can override it. This is the financial product for the renewal contract. |
| Quote Reason | You must select the Quote Reason from the list. |
| End Of Term Option | You must select a valid End of Term Option so a residual amount can be derived for the renewal assets in the quote. |
| Pricing Method | You must select one of the two pricing methods, either Target Rate or Solve for rate. See Price Renewal Quotes. |
The following table describes asset selection details.
| Column or Button | Description |
|---|---|
| Asset Number | Number of the asset |
| Asset Description | Description of the asset entered |
| Asset Location | Location of the asset |
| Net Investment Balance (NIV) | As of the existing contract end of term date. This amount should be the same amount as the Residual Value |
| Renewal Cost | Defaulted from the NIV, but can be updated. |
| End of Term Value | Defaulted from the End Of Term Option, but can be updated. |
| Add All Assets | Adds all asset lines eligible for renewal on a contract. |
| Add Asset | Adds the selected asset line from the contract. |
After a renewal quote is created, you can update the quote by accessing the Update page via any of the options described below:
Click Save and Continue from the Create Renewal Quote page
Open the renewal quote from the Search Summary page
Open the renewal quote from the Quote View page
You can update Pricing and Fees, and Services fields. However, the following renewal quote fields cannot be updated regardless of the quote status:
Pricing Method
Term
Product
End of Term Options
No updates can be made to a renewal quote with the status of Approved or Accepted.
Once a renewal quote has been successfully priced and validated, its status becomes Complete
Once a quote is created, you can view the summary of the quote values that are required to complete pricing. You can validate and price the quote, and ensure that all values necessary to price the quote are provided with no conflicts.
To enter or update pricing details from the Update page, enter the pricing parameters for the Pricing Method selected during the creation of the Renewal Quote.
Renewal Quote Pricing Options
The two pricing options for Renewal Quotes are Target Rate and Solve for Rate.
Target Rate
By selecting Target Rate, you can calculate a single, periodic payment amount for all assets on the quote. You can provide all values other than the payment amount, such as asset cost, residual value, frequency, term length and target rate. Only one payment level can be priced. The target rate may be the IIR or IRR.
Solve for Rate
By selecting Solve for Rate, you can calculate yields for a single payment structure for all the assets on the quote. You can enter a structured payment with levels (all with the same frequency), but must provide all values other than the target yield, including payment amounts, number of periods, frequency, term length, asset cost and residual value.
Once the quote is priced, you can return to the summary view to see the payment and yield calculations. From the Review page, you can perform the following tasks:
Open and edit the quote so you can re-price.
Caution: If you re-open after pricing, the previous pricing values will be discarded once the quote is updated, and you must confirm to continue. Approved and Accepted quotes cannot be updated or re-priced.
Submit the quote for Approval
Save and return to the renewal quote summary list for a contract.
The following rules and conditions apply to Renewal Quote pricing:
Statuses must be maintained so that you can search for and visually detect quotes that have been created and not yet priced from those that have been priced.
If the quote payment is not to be allocated to the assets on a pro-rated basis upon the activation of the renewal contract, you can update the payment per asset on the final contract.
You cannot call out to an external pricing engine.
Since no fees or services are automatically copied from the existing contract onto the renewal quote or the renewal contract, you must manually add fees and service lines if required.
The following fee types can be added to a renewal quote: Absorbed, Expense, Income, Security Deposit, and Miscellaneous.
Renewal Quotes with a status of Complete can be submitted for approval. The approval process for renewal quotes is configured through Approvals Manager. After approval is granted to the quote, the status is updated to Approved.
Only Renewal Quotes with a contract status of Booked or Expired (only for asset lines where the asset return request is Scheduled) can be approved.
If an asset line becomes Terminated, or its associated return request is not Scheduled, the renewal quote must be invalidated.
Approved renewal quotes can be accepted by the Lessee as defined on the contract. To accept a renewal quote, click Accept Quote. Upon acceptance, the renewal quote status becomes Accepted, and the existing contract/asset line is locked for modification purposes.
Only Renewal Quotes with a contract status of Booked or Expired (only for asset lines where the asset return request is Scheduled) can be accepted.
If an asset line becomes Terminated, or its associated return request is not Scheduled, the renewal quote must be invalidated.
You can import renewal quotes through a standard set of interface tables. The renewal quote interface enables you to optionally specify a contract template. The import program will validate that the contract template specified is valid for the Product on the Renewal Quote.
You can duplicate renewal quotes in any status. When duplicating a quote that has already been accepted, Oracle Lease and Finance Management ensures that you remove the asset lines in the renewal quote before it can be saved.
You can cancel renewal quotes in any status, including renewal quotes that have been Accepted, up to the activation of the renewal quote. The cancellation of an accepted renewal quote results in the following:
Removal of the asset lines on the renewal contract
The link between the renewal quote and the renewal contract is removed
The renewal contract status becomes Incomplete.
You can view a summary, read-only page of the renewal quote details.
You can consolidate renewal quotes with other renewal quotes or end of term termination quotes in a single, consolidated quote. For more information on consolidated quotes, see Consolidated Quotes.
Renewal quotes can be implemented by creating a new contract for the fixed renewal period for all of the assets included on the accepted renewal quote.
To implement a renewal quote, the following conditions must be met:
The contract must reach its original end of term
The Renewal Quote must be accepted, either manually or as part of a consolidated quote.
The quote can be accepted on any date before the last day of the base term, but the new contract for the fixed renewal period must not automatically be created until the end of term.
Any quoted assets that have been canceled from the quote should not be included in the new contract.
At end of term, you can automatically create a new contract for an accepted renewal quote. The values from the accepted renewal quote and the original contract are used to create the new contract, including contract header details, assets and asset values and quote details, payments and term.
You can also manually create the new renewal contract prior to automatic processing.
When a contract comes to the end of the base term, lessees can continue leasing the assets. This can happen in the form of evergreen, where there is no contractual term, or as a fixed term renewal.
Fixed term renewal decisions are often notified when the contract has already reached the evergreen period. If the lessor agrees with the lessee to start the renewal contract at the end of the base term, evergreen transactions including billing and depreciation, must be reversed. The following example illustrates this case:
| End of Term | 31 October, 2017 |
| Current Date | 30 November, 2017 |
| Renewal Start Date | 01 November, 2017 |
In this example, billings and depreciation for the month of November must be reversed.
In some cases, the lessor and the lessee agree to start the renewal contract on the current date. This does not require reversing evergreen transactions effective before the renewal date. The following example illustrates this case:
| End of Term | 31 October, 2017 |
| Current Date | 30 November, 2017 |
| Renewal Start Date | 30 November, 2017 |
When you create a fixed term renewal quote for a contract in evergreen status, you can enter any Expected Start Date between the End of Term Date plus one day and the current system date.
The Renewal Type field is added to the quote header. The default value of this field is Without Purchase.
A termination quote of type Termination – Without Purchase is created automatically to terminate the contract or assets quoted in the fixed term renewal quote.
The termination quote includes the following parameters:
The termination quote type is the same value selected for fixed term renewal type. The default value is Without Purchase.
The effective date of the termination quote is always the Expected Start Date minus one day.
The termination quote reason is the quote reason field selected in the fixed term renewal quote header.
All other quote header attributes currently supported for fixed term renewal quotes are also available on fixed term renewal quotes for evergreen contracts. These include the following attributes:
Valid From
Valid To
Renewal Term
Product
Contract Template
End of Term Option
End of Term Option
Pricing Method
Quote Reason
Comments
When you select assets to be included in the fixed term renewal quote, the system automatically assigns a default value to each of the assets based on the effective date of the quote and the book classification of the source contract. You can override these values.
| Book Classification | End of Term | After the End of Term |
| Operating Lease | Residual Value | Net Book Value as of the quote effective date |
| Direct Finance Lease | Residual Value | Net Book Value as of the quote effective date |
After the assets are selected, you can enter the required payment details for the selected pricing method. The quote can then be saved, validated and submitted for approval.
When a fixed term renewal quote is accepted, the following events take place:
The underlying termination quote is accepted.
A termination invoice is generated for any termination quote billable amounts.
A renewal contract is created for the assets being renewed either when you:
Automatically run the program Activate Renewal Contracts or,
Click the button Create Renewal Contract from the Renewal Quote search results table.
After the contract is created, you can add other assets or contract lines supported for fixed term renewal contracts. Upon activation of the renewal contract, the renewal and underlying termination are completed.
When the underlying termination is completed, the following adjustments must take place based on the termination effective date:
If the termination effective date is the last day of the base term, all evergreen related transactions must be reversed:
Billing: On-account credit memos are issued for evergreen invoices.
Cash: You are expected to manually unapply cash if it has been applied to an evergreen invoice.
Depreciation: Depreciation accrued after End of Term must be reversed if the renewal contract's book classification is Direct Finance Lease.
If the termination effective date is after the end of the base term, standard evergreen termination adjustments apply, that is, all billed amounts due after the termination effective date are credited.
The following fields are displayed in the Termination Quote Details region of the Renewal Quote Details page:
Termination Number: The underlying termination quote number.
Effective Date: The effective from date of the underlying termination quote.
Renewal Type: The termination type of the underlying termination quote.
Termination Amount: Total quote amount.
Termination quotes created for processing fixed term renewals are not available to be searched and viewed independently from the standard Termination Quote pages. They cannot be approved, accepted or consolidated independently.
The fixed term renewal quotes for evergreen contracts are processed based on the following points:
Running the program Terminate Expired Contracts terminates the quoted assets/contract.
On processing the termination for renewals, the asset return request is created in Pending Renewal status and once the renewal contract is activated, the status is updated to Cancelled.
Users may create and activate renewal contracts from the Renewal Quote search results table on the Renewal Quotes page or by running the concurrent program Activate Renewal Contracts.
Once a fixed term renewal quote has been accepted, quote cancellation is not supported for the fixed term renewal quote as well as for the underlying termination quote.
Cancelling a fixed term renewal quote prior to acceptance will also cancel the underlying termination quote.
Renewal Contracts can be created by the following methods:
A concurrent program picks contracts to be expired, and if the program finds an accepted renewal quote, it automatically creates a renewal contract.
A renewal contract can be created manually from the accepted renewal quote or consolidated quote before the end of term of the base contract.
If the interface data is pre-accepted, an accepted renewal quote and renewal contract is created.
While creating the renewal contract, if a contract template has been selected on the renewal quote, then contract level terms and conditions will be copied over from the contract template. If no contract template has been selected, then contract level terms and conditions will be copied over from the base term contract.
Only Terms and Conditions will be copied over to the new contract from Contract Template. No other Contract detail will default from the selected Contract Template.
The following fields cannot be updated in the renewal contract:
Effective From Date (Contract Start Date)
Vendor Program
Customer
Customer Account
After all renewal asset lines have been terminated on a base contract, you can run the Activate Renewal Contract concurrent program to perform the following actions:
Process off-lease transactions for the renewed assets
Activate the contract
Cancel the dummy asset return requests created for renewed assets.
You can cancel non-activated renewal contracts by using the standard cancellation functionality. Upon cancellation, the following takes place:
The link between the renewal contract and the quote is removed
The Create Renewal Contract button for the associated quote becomes active again
A message is displayed warning you that renewal is still accepted and will result in the creation and activation of a renewal contract unless cancelled.
As a method of terminating an existing contract, lessors may agree to refinance the termination amount. In other words, instead of paying the termination quote amount, the lessee contracts a loan with the lessor to pay the termination over time. To determine the payment and amounts, the lessor can use a refinance renewal quote where principal amount to be financed is the termination amount.
Use the new renewal type option when creating a renewal type quote to determine whether to:
calculate a new contract payment for the existing renewal type quote (now called “fixed term renewal”), or
to calculate a payment for the new refinance type quote.
When quoting a refinance, a termination quote (using the type “rollover with purchase”) is created to calculate the termination amounts from the existing lease which are used as the principal amount to be financed on the new contract. During quote creation, select the pricing method and calculate a payment and the yields for a new loan contract. The pricing methods Rate Card (Structured), Solve for Payments, and Solve for Rate are available for calculating the new contract payment amount.
Once approved and accepted, a new contract is created when the contract reaches end of term. The termination amounts from the existing contract are rolled over to the new contract as asset lines (excluding outstanding receivables and taxes) and upon activation of the new contract the assets are retired from Oracle Assets with proceeds of sale as the quote purchase amount. The asset record numbers do not change between the old and new contracts.
Billing and credit memos are generated to pay off the termination quote and transfer the amounts to the new contract. The accounting event Re-Lease is used to transfer the assets to a new contract and the Booking accounting event is only called if there are new assets added on renewal contract. In cases where the new contract needs to be updated or edited, the contract may be created in advance, but cannot be activated until the contract reaches end of term.
The refinance contract can be created at any of the following points:
After the Refinance quote is accepted, you can manually create the refinance contract from the refinance quote. The contract can be updated before approval and activation.
If not created from the quote, the contract is automatically created when terminations are implemented.
The contract is activated only at the same time the associated terminations are implemented.
New Assets: If any new asset is added to the contract, Booking Accounting applies to that asset.
Existing Assets: Re-Lease Accounting applies to all assets terminated in the source contract and getting refinanced.
If the termination amount is to be refinanced, the taxes due on termination rolls over into the financed amount of the new contract. When taxes are rolled over and refinanced, the lessor pays taxes to the tax authority on behalf of the lessee. This results in an additional loan amount that is added to the financed amount of the new contract.
Important: In order to settle termination invoices created at the time of quote acceptance, on account credit memos must be created.
To enable rollover and refinancing of termination taxes into a new contract at the organizational unit level, select the system option Rollover Termination Taxes. This is available as a check box under Setup: System Options: Operational Options: Termination Options: Rollover Options. If enabled, termination taxes are always included in the rollover amount of rollover and refinance quotes and, thus, included in the financed amount of the new contract once the termination process is completed.
Note: This option is disabled by default.
A termination quote includes a set of Billed Not Paid quote lines representing open receivables at the time the quote is created. In cases of rollover and refinance quotes, a lessor can include Billed Not Paid amounts in the rollover amount that is financed in a new contract. If Billed Not Paid amounts are rolled over into a new contract, invoice based credit memos are created to settle the invoices associated to the open receivables.
To enable rollover and refinancing of Billed Not Paid amounts into a new contract at the organizational unit level, select the system option Rollover Billed Not Paid. This is available as a check box under Setup: System Options: Operational Options: Termination Options: Rollover Options. If enabled, billed not paid amounts are always included in the rollover amount of rollover and refinance quotes and, thus, included in the financed amount of the new contract once the termination process is completed.
Note: This option is disabled by default.
Additional Information: You can define the quote reason selected in termination and renewal quotes as an accounting source in Oracle Sub-Ledger Accounting.