Changing Lease Terms After Schedule Creation

After a lessee lease reaches Lease Liability Status 20 (Schedules Complete), it might be necessary to make changes to the lease terms or billing records. For example, a lease might be extended, terminated early, or the amounts associated with the leased asset might change.

Depending on the type of change you need to make to the lease terms, you use one of the following programs:

• Lease Information program (P1501)

  You can update the borrowing rate, or enter a date in the ROUA End Date field that is greater than the latest recurring billing end date. These are the only lease term changes you can make from the Lease Master Information program.

• Recurring Billing Information (P1502)

  Any change that impacts the billing records for the lease must be made using this program. This includes changing the dates of the lease term, as those changes impact the billing records.

  Also note that you can use a global update program to update recurring billing records. However, processing options associated with the global update process determine whether that process is available for use on recurring billing records associated with leased assets for which amortization schedules exist. See Updating Recurring Billing Records (Release 9.2 Update) for additional information.

Depending on the changes you make, and the status of the lease, the system updates the Recalculate Lease Liability field on the lease with one of these values:

• 1: Remeasure

  The changes you made require a remeasurement of the lease, and do not include an early termination.

• 2: Terminate or Remeasure

  The changes you made require you to run either the remeasurement or the early termination process.

The Recalculate Lease Liability value, along with the lease liability status, determine which of these actions you can take:

• Remeasurement

  This action is available when you make any change to a leased asset that impacts the amortization schedules, and your lease is at a status 20 or greater. When you select this option, the system recalculates amortization schedules based on your changes, and if necessary, creates remeasurement journal entries to adjust previously reported amounts.

  Note that if your lease is at a Lease Liability Status of 20 (Schedules Created) or 30 (Schedule Review Complete), the system will delete your existing schedules and recreate schedules based on your changes without creating remeasurement journal entries. If your lease is at a status 40 (Commencement Complete), the system updates your existing schedules based on the changes, and creates remeasurement journal entries to adjust any journal entries that were previously created. The system also updates the Remeasurement Flag on the amortization schedule with 2 (Remeasurement Complete) in the period during which the remeasurement took place.

• Early termination

  This action is available when the only change you make to a lease is to change the recurring billing end date to be earlier than the existing date, and monthly journals have been run through the end of the new end date. When you select this option, the system creates termination journal entries based on the lease term changes and the processing option settings in the P15171, and does not update the amounts on the amortization schedule. If monthly journals have not been run through the termination date, early termination journal entries will be created when the monthly journals are run for the termination date.

  The system also updates the Journals Exist field with a red square in the period when the termination is scheduled to occur, selects the Early Termination Flag option, creates a batch of termination journal entries, and updates the batch information fields in the period where the termination occurs, and every period after, through the end of the schedule, which excludes those periods from being included in monthly processing.

If you make changes that cause the system to update the Recalculate Lease Liability field, the system assumes that you will then run either the remeasurment or early termination process to update the amortization schedules, create journal entries (if necessary), and to clear the recalculation flag. Until the recalculation flag is cleared, you cannot continue monthly lease processing.

If you have entered lease term changes incorrectly, you can use the Clear Recalc Flag feature to reset the Recalculate Lease Liability field to 0 (No action required).

Note:

The Clear Recalc Flag option only clears the Recalculate Lease Liability field, and does not undo any changes you made to the lease or recurring billing records. If you are clearing this flag because you entered incorrect lease term changes, you must correct the lease term changes. The system then updates the Recalculate Lease Liability flag again when you save your changes.

This option should be used with care.

This table lists several lease term change scenarios, and describes the method you might use to make the changes:

Lease Term Change Scenario	Method for Entering and Processing Change
The lease is at status 10 (Lease Terms Complete) and the monthly lease payment amount must be changed.	Because the schedules have not yet been generated, you can make changes to the lease and the recurring billing records without running any remeasurement processes.
The lease is at status 20 (Schedules Created) or 30 (Schedule Review Complete) and the monthly lease payment amount must be changed.	You can make these changes using either of these methods: Delete the existing schedules, update the billing records with the new amounts, and then regenerate the amortization schedules. Use the Change Lease Terms feature in the Recurring Billing program to enter the new amounts, and then run the remeasurement process. The remeasurement process deletes the existing schedules and creates new schedules based on the updated amounts. No remeasurement journal entries are created.
The lease is at status 40 (Commencement Complete) and the monthly lease payment amount must be changed.	Because schedules and journal entries already exist for this lease, you must make these changes using the Change Lease Terms feature in the Recurring Billing program. After you update the amount in the billing records, you then run the remeasurement process to update the amortization schedules and create remeasurement journal entries.
The lease is at status 10 (Lease Terms Complete) and lease ending date is now 1 year earlier than initially expected.	Because the schedules and journal entries have not yet been generated, you can make changes to the lease and the recurring billing records without running any remeasurement processes.
The lease is at status 20 (Schedules Created) or 30 (Schedule Review Complete) and lease ending date is now 1 year earlier than initially expected.	You can make these changes using either of these methods: Delete the existing schedules, update the billing records and lease with the new date, and then regenerate the amortization schedules. Use the Change Lease Terms feature in the Recurring Billing program to enter the new date, and then run the remeasurement process. Note that the early termination process is not available until the lease is at status 40. The remeasurement process deletes the existing schedules and creates new schedules based on the updated date. No remeasurement or termination journal entries are created, as initial commencement journal entries do not yet exist.
The lease is at status 40 (Commencement Complete) and lease ending date is now 1 year earlier than initially expected.	Because schedules and journal entries already exist for this lease, you can make these changes using the Change Lease Terms feature in the Recurring Billing program. Note that if the end of period journals have been run for the selected grid row and you only wish to process an early termination, you can change the Ending Date in the Recurring Billing Revisions form. If recurring billing payments are stepped, you can also delete future lines for which no monthly journals have been run. After you update the date in the billing records, you then run the remeasurement or the early termination process to update the amortization schedules and create remeasurement or termination journal entries. Alternatively, you can use the Change Lease Terns feature to enter an early termination date.

Note:

Be aware that manual billing changes will not trigger lease remeasurement processing. It is assumed that all manual billing records are created before initial amortization schedules are created, and processed on or before lease commencement. If manual billing records are added after lease commencement, and they have an effect on ROUA, the system will not update the Recalculate Lease Liability flag. However, the updates will be processed if the lease is remeasured for any other reason.

Additionally, suspending a recurring billing line does not impact amortization schedules, or initiate an update of the Recalculate Lease Liability flag. If you want a billing suspension to be reflected in the lease liability calculation, you must use the change lease terms feature.

After you process a remeasurement or an early termination, you can review and post the journal entries using the same method you use to review and post commencement and monthly journal entries. See Reviewing, Approving and Posting Lease Commencement Journal Entries for information and instructions.

If you delete a batch of termination or remeasurement journal entries, the system resets the Recalculate Lease Liability status to the value it was before you ran the remeasurement or early termination process. You must then rerun the process to regenerate journal entries.