Defining Lease Financial Terms

Accounting Date

Enter the Accounting date. Current date is used as the default option. Accounting date is used in transactions with Asset Management.

Interest Rate Percent

Displays the approximate percentage of profit the lessor gains by leasing the asset. This number must be an annual interest rate percentage in whole numbers.

As a lessee on a payable lease, the discount rate for the lease should be the rate implicit in the lease (the Interest Rate Percentage field) unless that rate cannot be readily determined.

If the rate cannot be determined, the lessee is required to use its incremental borrowing rate (the Borrowing Rate Percentage field). The Borrowing Rate Percentage defaults from the Borrowing Rate Default Page.

Borrowing Rate Percent

Displays the interest rate incurred at the inception of the lease if you had borrowed the necessary funds to purchase the leased asset. This number must be an annual interest rate percentage in whole numbers.

Total Lease Payment

Displays the total lease payment amount.

ROU Asset Cost

Displays the discounted ROU Asset amount.

Lease Currency

Enter the lease currency for this lease. Invoices and payments are processed using this base currency. The default currency comes from the business unit level.

Prorata Share

Enter the prorata share, which is a percentage indication of how much space the tenant is occupying in the building. Prorata share can assist with calculation of operating expenses and what share each tenant should bear. This field is informational only.

Current Est Monthly Payment (current estimated monthly payment)

Displays the estimated monthly payment or invoice amount. The system calculates the estimated monthly payment by totalling the amounts defined in the Schedule of Recurring Billing and Schedule of Recurring Rent fields.

Max Op.Ex. Increase/Year (maximum operating expenses increase/year)

Select Amount or Percent, and enter the maximum amount or percent that operating expenses can increase per year.

Max Lease Rent Escalation

Select Amount or Percent, and enter the maximum amount or percent that the rent can escalate over the life span of the lease. These options are for information only, the system does not perform any processing based on these options.

See Understanding the Transaction Generator.

Exclude Base Year

Select to indicate if operating expenses for a base year should not be charged. You can specify the base year and the base year amount to exclude. This is informational only; these fields are used to record the base year exclusion terms from your lease, but the system does not include these terms in the operating expense reconciliation/audit processes.

Proration Method

Select from three available values: No Proration, 365 Days, or 360 Days. The system populates these values by default from the business unit level, but you can override them here. If you select 365 Days, then the system prorates the base rent for the first and last transaction if the start and end dates do not match the frequency start and end dates. The 365-Day method supports weekly, monthly, quarterly and annual frequencies. The 360-Day method supports only monthly frequency. This field will be hidden for Capital/ Finance leases.

Recognize Monthly Expense

Select this option to prorate non-monthly financial terms (such as quarterly schedules) by period. Lease interest for finance leases and the amortization of the underlying assets for operating leases are recognized on a monthly basis.

You must enable this option using the Lease Administration Business Unit Definition - General Page.

Transaction Code

Displays the transaction code. The transaction code is used to determine the accounting entry template.

BPO (Bargain Purchase Option)

Select if the lease includes a bargain purchase option, which represents a payment by the lessee to the lessor at the end of the lease term, allowing the lessee to obtain title to the leased property.

BRO (Bargain Renewal Option)

Select if the lease includes a bargain renewal option, which requires a payment if the lease agreement grants the lessee the right to renew or extend the lease.

Combined Rentable Area

Displays the total sum of the combined rentable size of the properties on this lease. The information is calculated from the property information on the General Information page. This field will be hidden for non- property leases.

Straightline Accounting Dates

Select an option to generate the straightline schedule. The available options are:

• Use Lease Commencement/Termination Dates: Select this option to set the default Straightline dates to Lease Start and End Dates.

• Override: Select this option to enter a Straightline Start Date and End Date.

Add Base Rent

Click to add base rent for the lease. You must have at least one base rent defined before you can activate the lease.

Add Initial Direct Cost

Click to add an initial direct cost payment for the payables lease.

Add Lease Incentives

Click to record lease incentives received.

Add Operating Expense

Click to add operating expense details for the lease.

See Understanding Operating Expenses.

Add Miscellaneous Rent

Click to add miscellaneous rent details for the lease. You must enter the rent type, which appears on an invoice or payment.

Add Prepaid Rent

Click to add prepaid rent for the lease.

Percent Rent Details

Click this link to enter percent rent details, such as sales categories and breakpoint amounts.

See Understanding Percent Rent Terms.

Security Deposit Details

Click this link to enter security deposit details.

See Setting Up Security Deposits.

Copy Terms

Select the financial terms you want to copy to a new term.

MTM Extension

Select the MTM Extension check box to select the financial terms applicable for MTM Extension and click the MTM Extension button to create new term rows with the MTM icon displayed.

Financial term details on the MTM terms created have the following default values:

• Start Date: Termination date of the Lease incremented by one day.

• End Date: Calculated based on the number of months to extend value

• Ship To, Payee: Values copied from the source financial term.

• Calendar, Schedule: Values copied from the source financial term if the calendar frequency is monthly. Else the values are left blank.

• Amount for MTM Extension: Base rent amount on the source financial term.

• Reference: MTM Extension.

Financial Term

Displays one of the following options: Base Rent, Operating Expense or Miscellaneous.

Rent Type

Displays the rent type.

Related Asset

Indicates if a purchase option is tied to a specific asset or to all assets.

Amount

Displays the current amount for the recurring payment or invoice.

Frequency

Displays the recurring frequency for payment or invoice.

Indicates that straightline accounting applies to the schedule or recurring rent for the financial term row on which the icon appears.

Indicates that a rent escalation applies to the schedule of recurring rent for the financial term row on which the icon appears.

Copy Selected Financial Terms

Click the Copy Selected Financial Terms button to copy each selected financial term into a new term.

Add Lease Payments

Select a lease payment type for the operating receivables lease:

• Add Base Rent: Use to add base rent for the receivables lease. You must have at least one base rent defined before you can activate the lease.

• Add Initial Direct Cost: Use to add initial direct cost payments for receivables leases.

  Note: This lease payment type does not integrate with PeopleSoft Billing.

• Add Lease Incentives: Use to add lease incentives paid to lessee for receivables leases.

• Add Miscellaneous Rent: Use to add miscellaneous rent details for the receivables lease. You must enter the rent type, which appears on an invoice or payment.

• Add Operating Expense: Use to add operating expense details for the receivables lease.

  See Understanding Operating Expenses.

• Percent Rent Details: Use to enter percent rent details, such as sales categories and breakpoint amounts, for the receivables lease.

  See Understanding Percent Rent Terms

• Security Deposit Details: Use to enter the security deposit type, amount, and guarantor for the receivables lease.

  See the Financial Terms - Security Deposit Page.

Collectibility is Not Probable

Select this option to indicate collectibility is unlikely for the receivables lease. You can use this information for reporting.

Escalation Type

Specify the escalation type for rent increases. The options are:

Index: Specifies rent increases based on a particular index. These increases are variable and can change depending on the values established during product related setup.

See Understanding Economic Index Values.

Defining Market Rates

Stepped: Specifies a fixed rent increase. Escalations can be auto-generated throughout the lease period. Manual entry of escalation is also allowed.

Base Index

Select the index to use as the first reference point for rent escalations when using the escalation type of Index. This index compares the subsequent index values entered in the escalation schedule.

Index Basis Date

Enter the date to be used to fetch index values in the base index.

Add Escalation

Click to insert a new escalation schedule.

Index

Specify an alternate index to use in lieu of the base index.

Calc Method (calculation method)

Select the calculation method for the rent escalation schedule. The available methods are:

Base: Specifies this escalation schedule to use the base index as the calculation method for the rent escalation. This method compares index values on the escalation date and the start date of the lease term and applies the escalation amount to the actual base rent amount.

Last: Specifies this escalation schedule to use the prior index defined on the previous row. If there is no previous escalation row then it applies it to the index on term start date. This method compares index values on the escalation date and the last (prior) escalation date and applies the escalation amount to the prior escalated rent.

Index Basis Date

Enter the date to be used to fetch index values in the escalation index.

Minimum Amount

Enter the minimum escalation amount for base rent. The system allows users to enter negative values or zero values (no value) for a negative rent escalation when there is a decrease in the index values when compared to Base Index.

Maximum Amount

Enter the maximum escalation amount for base rent.

Min Percent (minimum percentage)

Enter the minimum percentage escalation for the base rent. The system allows users to enter negative values or zero values (no value) for a negative rent escalation when there is a decrease in the index values when compared to Base Index.

Max Percent

Enter the maximum percentage escalation for the base rent.

01/01/2011

$500.00

$5500.00

01/01/2012

$1000.00

$6000.00

01/01/2013

$1500.00

$6500.00

01/01/2014

$2000.00

$7000.00

01/01/2015

$2500.00

$7500.00

Escalate Every

Select suitable frequency for the escalation to be generated.

Escalate By

Enter the amount or percentage for escalation to be generated. You can enter the amount either by area or a specific amount. The system calculates the specific amount if rent by area is specified or vice versa.

If amount is entered then corresponding percentage will be calculated and displayed in the Rent Escalation Schedule grid. This escalation amount is applicable all through the lease term. If percentage is entered then the equivalent amount is calculated.

Start Date

Enter the start date to indicate from when the escalation will be effective.

Escalation Amount

Enter the fixed escalation amount for base rent.

Sales/Use Tax Destination

Location code on which the SUT calculation for the lease should be based.

Sales/Use Tax Applicability

Displays the sales and use tax applicability rule. This indicates whether sales and use tax is applicable for the specific supplier location and how sales tax is applied. Values are:

• Direct Pay

• Item is Exempt

• Purchaser is Exonerated

• Sales Tax Applicable

• Use Tax Applicable

Ultimate Use Code

Enter an ultimate use code to override the default tax rate for a location.

Include VAT

If this check box is selected, indicates that VAT should be included in the amount total before the SUT amount is calculated.

Expand All Sections

Click this button to scroll to and access every section on the page. You can also expand one or more sections by clicking the arrow next to the section's name.

Collapse All Sections

Click this button to collapse all sections displaying only the header information. If you expand one or more sections, you can click the arrow next to the section's name to collapse the section.

Physical Nature

Indicates whether an object is a good or a service. Many countries are required to report the sale and purchase of goods separately from services. The default comes from the supplier location, voucher origin or AP business unit option for Payables leases. The default comes from the sales line identifier, customer location, bill source, bill type or billing business unit for Receivables leases.

Change Physical Nature

Click to override the default physical nature for this item. The system resets all the VAT defaults.

Location Country

For Payable Leases, displays the PeopleSoft Payables business unit country.

For Receivable Leases, displays the country of the business unit that is the source of the transaction. By default, shows Billing business unit location country.

Location State

For Payable Leases, displays the PeopleSoft Payables business unit state.

For Receivable Leases, displays the state of the business unit that is the source of the transaction. By default, shows the Billing business unit location state. The system populates a default value for this field only when the location country tracks VAT by province.

Supplier Location Country

Displays the supplier location country. Applicable only for Payable leases.

Supplier Location State

Displays the supplier location state. Applicable only for Payable leases.

Customer Location Country

Displays the customer's (buyer) bill-to location country. Applicable only for Receivable leases.

Customer Location State

Displays the customer's (buyer) bill-to location state. The system populates a default value for this field only when the customer location country tracks VAT by province. Applicable only for Receivable leases.

Service Performed Country

For Payable Leases, depending on the services performed flag setting in the payables hierarchy (Payables Business Unit option, Voucher Origin, Supplier Location), the system sets the value for this field as follows:

• If the services performed flag is the ship-from location, the system populates the service performed country with the supplier location country.

• If the services performed flag is the ship to location, the system populates the service performed country with the PeopleSoft Payables business unit country.

• If the services performed flag is the buyer's location, the system populates the service performed country with the PeopleSoft Payables business unit country.

• If the services performed flag is the supplier's location, the system populates the service performed country with the supplier location country.

For Receivable Leases, depending on the services performed flag setting in the billing hierarchy (Billing Business Unit, Bill Type, Bill Source, Customer Location, Sales Line Identifier), the system sets the value for this field as follows:

• If the services performed flag is the ship-from location, the system populates the service performed country with the ship-from business unit country. If there is no ship-from business unit, the system uses the billing business unit location country.

• If the services performed flag is the ship-to location, the system populates the service performed country with the ship-to customer location country.

• If the services performed flag is the location of the buyer, the system populates the service performed country with the customer's bill-to location country.

• If the services performed flag is the location of the supplier, the system populates the service performed country with the billing business unit location country.

Service Performed State

For a Payables Lease, depending on the services performed flag setting in the payables hierarchy (Payables Business Unit option, Voucher Origin, Supplier Location), the system sets the value for this field as follows:

• If it is the ship from location, it sets it to the supplier location state.

• If it is the ship to location, it sets it to the PeopleSoft Payables business unit state.

• If it is the buyer's location, it sets it to the PeopleSoft Payables business unit state.

• If it is the supplier's location, it sets it to the supplier location state.

For a Receivable Lease, depending on the services performed flag setting in the billing hierarchy (Billing Business Unit, Bill Type, Bill Source, Customer Location, Sales Line Identifier), the system sets the value for this field as follows:

• If the services performed flag is the ship-from location, the system populates the service performed state with the ship-from business unit state. If there is no ship-from business unit, the system uses the billing business unit location state.

• If the services performed flag is the ship-to location, the system populates the service performed state with the ship-to customer location state.

• If the services performed flag is the location of the buyer, the system populates the service performed state with the customer's bill-to location state.

• If the services performed flag is the location of the supplier, the system populates the service performed state with the billing business unit location state.

Ship From Country

For a Payables Lease, displays the supplier's ship from location country. In the case of transactions involving goods or freight service transactions, this is used to determine the VAT treatment.

For a Receivable Lease, displays a default value from the ship-to customer's address, or from the bill-to customer's ship-to address if the ship-to customer is not available. In the case of transactions involving goods or freight service transactions, this is used to determine the VAT treatment.

Ship From State

If the ship to country is defined as tracking VAT by state or province, it displays the supplier's ship from location state. In the case of transactions involving goods or freight service transactions, this is used to determine the VAT treatment.

Ship To Country

For a Payables Lease, displays the ship to location country. In the case of transactions involving goods or freight service transactions, this determines the VAT treatment.

For a Receivable Lease, displays the Billing business unit location. In the case of transactions involving goods or freight service transactions, this is used to determine the VAT treatment.

Ship To State

If the ship to country is defined as tracking VAT by state or province, it displays the ship to location state. In the case of transactions involving goods or freight service transactions, this is used to determine the VAT treatment.

Service Type

For Payables Lease, displays the VAT service type of Freight  or  Other.  The value in this field determines whether or not the special rules for freight transport within the European Union apply. The value comes from the VAT default hierarchy.

For Receivables Lease, the system retrieves the value from the service VAT treatment default, according to the VAT defaulting hierarchy. This value determines whether the VAT treatment is defaulted based on the ship-to and ship-from countries, or the buyer's and seller's countries.

Place of Supply Driver

Displays the usual place of supply (meaning, the place where VAT is usually liable) for the service. This value is used to help determine the place of supply country and the VAT treatment. Options are: Buyer's Countries, Supplier's Countries,  or  Where Physically Performed.  The system derives the value from the VAT default hierarchy.

Reporting Country

Displays the country for which this VAT will be reported. This is the VAT entity VAT registration country and determines many of the VAT defaults.

Defaulting State

If the reporting country requires that VAT be tracked by state or province, this field displays the state within the reporting country that is used to retrieve values from the VAT Defaults table.

Supplier Registration Country and Supplier Registration ID

Displays the registration country and ID of the supplier taken from the supplier information. Applicable only for Payable leases.

Customer Registration Country

Displays the registration country of the bill-to customer. Applicable only for Receivable leases.

Exception Type

Displays the exception granted to the VAT entity. Values are: None, Exonerated, or Suspended. This value is specified on the VAT entity registration.

Certificate ID

If applicable, displays the ID of the VAT exception certificate that may have been issued to the VAT entity.

VAT Registration Country and Registration ID

Displays the registration country and ID of the supplier.

Calculate at Gross or Net

Indicates how VAT is calculated. Values are:

Gross: The system calculates VAT before it applies any early payment discounts.

Net: The system calculates VAT after it deducts early payment discounts. If there are two percentage discounts, the system uses the larger of the two when it calculates VAT. The system does not use discount amounts, only discount percentages.

The default value comes from the VAT entity driver.

Recalculate at Payment

Select this check box to enable the recalculation of VAT at payment time to allow for any early payment discounts, if you are calculating VAT at gross. This causes the system to adjust the VAT amount at the time of payment if the discount has been taken. This is set on the VAT entity driver in the VAT defaults table.

Declaration Point

Appears for a good or service when you want VAT transaction information to be recognized for reporting purposes. Values are:

• Invoice: VAT is recognized at time of invoice.

• Payment: VAT is recognized at time of payment.

• Delivery: VAT is recognized on delivery.

This value may be set at several levels in the VAT hierarchy, that is, VAT entity registration, business unit options, supplier, or supplier location.

Rounding Rule

Displays the VAT rounding rule. The value comes from the VAT country, VAT Entity, supplier, or supplier location drivers. Values are:

Nat Rnd (natural round): Amounts are rounded normally (up or down) to the precision specified for the currency code. For example, for a currency defined with two decimal places, 157.4659 would round up to 157.47 but 157.4649 would round down to 157.46.

Down (round down): Amounts are rounded down. For example, for a currency defined with two decimal places, 157.4699 would round down to 157.46.

Up (round up): Amounts are rounded up with a rounding precision to one additional decimal place. For example, for a currency defined with 2 decimal places, 157.4659 would round up to 157.47, but 157.4609 would round down to 157.46.

Use Type

Determines the split between recoverable (taxable) and non-recoverable (non-taxable) VAT.

The value comes from the VAT defaulting hierarchy of Lease Administration, either from transaction routing code, supplier location, supplier or Lease Administration business unit. Applicable only for Payables leases.

Place of Supply Country

Displays the country in which the VAT is liable. This field appears only when the transaction is for services.

Treatment

Displays the VAT treatment. VAT treatment is determined by a complex set of algorithms. Values are:

• Domestic Goods Purchase: If the ship from and ship to countries are the same, and the supplier is registered for VAT, the transaction is treated as domestic.

• Domestic Service Purchase: If the buyer and seller are both located in the country where the VAT is liable, the transaction is treated as domestic.

• EU Goods Purchase: If the ship from and ship to countries are different, the system determines whether both countries are located within the European Union. If so, the system looks at the VAT registration for each trading partner to determine whether the transaction should be treated as an intra-EU purchase, domestic, or outside the scope of VAT.

• EU Service Purchase: If each trading partner is located and registered in different EU countries, and the VAT on a service is liable in the buyer's country, the transaction is treated as a self-assessed EU Services Purchase.

• Self-Assess Goods Import: If the ship from country is different from the ship to country and either or both of the countries are located outside of the European Union, and the supplier is not registered in the ship to country, the transaction would be treated as an import. If the flag on the entry in the VAT Country table for the VAT reporting country indicates that VAT on imports should be self-assessed, the transaction will be treated as a self-assess goods import, and both input and output VAT will be recorded.

• Self-Assess Service Import: If each trading partner is located and registered in different countries, and the VAT on a service is liable in the buyer's country, the transaction is treated as a self-assessed services import.

• Zero-rated Goods Import: If the ship from country is different from the ship to country and either or both of the countries are located outside of the European Union, and the supplier is not registered in the ship to country, the transaction would be treated as an import. If the flag on the entry in the VAT Country table for the VAT reporting country indicates that only input VAT should be recorded on imports, the transaction will be treated as a zero-rated goods import.

• Outside of Scope: If the supplier is not registered for VAT, or if the VAT is liable in a country other than the VAT reporting country, the transaction is treated as outside the scope of VAT.

• No VAT Processing: For transactions where the physical nature is goods, if the ship to country has not been defined as a VAT country and the VAT reporting country on the transaction is blank, no VAT information will be recorded.

Within PeopleSoft, detail VAT treatment values on the transaction lines are used for applying the precise defaults applicable to the transaction lines. The treatment is determined based the rules applicable to the transaction.

Applicability

Displays the VAT status. Applicability is determined by an algorithm that makes use of the Applicable field in the VAT defaults table, the value of which may be set at almost every level in the PeopleSoft Lease Administration VAT defaulting hierarchy. Values are:

• Exempt (not subject to VAT).

• Exonerated.

• N/A (not applicable): Valid only when VAT treatment is No VAT Processing.

• Outside (outside scope of VAT).

• Suspend.

• Taxable.

VAT Code

Displays the VAT code that defines the rate at which VAT is calculated for this schedule. The default value comes from the VAT country, purchase order options, supplier, supplier location, item category, and item levels in the PeopleSoft Lease Administration VAT defaulting hierarchy.

Record Output VAT

Select this check box to enter vouchers where VAT is not included on the invoice but is payable to the VAT authority rather than the supplier. In this case, you account for both input and output VAT for the purchase. This is the case for an Intra-EU Acquisition or when you must account for output VAT on a service supplied by a foreign supplier. This is also referred to as self-assessing for VAT. The value comes from an algorithm that uses the treatment and applicability to retrieve the applicable value from the PeopleSoft-delivered VAT system setup data.

Transaction Type

Displays the code that categorizes and classifies this transaction for VAT reporting and accounting. The default value comes from the VAT entity registration, purchase order options, supplier, supplier location, item category, and item levels in the PeopleSoft Lease Administration VAT defaulting hierarchy.