Changing Lessee Lease Terms Using Recurring Billing
In many cases, the amounts or dates associated with leased assets can change during the course of a lease. These changes are called lease term changes, and they can impact the amortization schedules and journal entries associated with the balance sheet lessee accounting process.
To make lease term changes to your recurring billing records, your leased asset must be at a Lease Liability Status of 20 (Amortization Schedules Created) or greater. This status indicates that schedules exist for the associated asset.
You have two methods for entering lease term changes in your recurring billing records. From the Recurring Billing Revisions form:
Select a billing record and then select Change Lease Terms from the Row menu.
This option is only available if the selected row has existing amortization schedules, and the effect on lease liability is set to Yes. When you use this option, you select one billing record and make your changes. The system automatically updates all of your existing records (for the selected asset and for the same payment step), and creates new records as needed, based on your changes. You can then make any additional updates in the detail area of the form.
Enter changes directly in the detail area of the form.
When you use this option, you must manually update all lines that require changes, and create any new lines that are needed. You must use this option to make changes to billing lines with the effect on lease liability set to No or GRV.
Before using this option, be sure that you have a complete understanding of the rules associated with recurring billing records for balance sheet lessee accounting, including stepped payments, suspended lines, and multiple lease versions. See Understanding Recurring Billing for Balance Sheet Lessee Accounting (Release 9.2 Update) for additional information.
When you select the Change Lease Terms option, the system displays the Change Lease Terms window. The Lease Term Change row option is available only for rows having the same lease version as the default lease version in the header. The window includes header information for the lease line, and enables you to make changes to these fields:
Early Termination
Use this field to specify the Term Change End Date that represents an early termination. If the early termination box is checked, all other fields are disabled except for the Term Change End Date.
Term Change As Of Date
This field is required, and reflects the date on which you want your changes to be effective.
Gross Amount
This field represents the changed amount for the billing record. The system also displays the current amount for your reference. If you leave the field blank, the existing value is used.
Term Change End Date
This date reflects the date on which your changes end. This date must be greater than or equal to the last day of the month of the date in the Lessee Accounting JE Thru Date field in the header of the form, and must also be greater than or equal to the Term Change As Of Date you enter. If you are using stepped payments, the end date can only be extended on the last step.
Effect on Lease Liability
This field is editable only if the Term Change As Of Date is greater than the date in the Lessee Accounting JE Thru Date field.
After you enter your changes, you click OK. The system returns you to the Recurring Billing Revisions form, and enters an ending date in all existing billing rows that is one day prior to the date you entered in the Term Change As Of Date field. The system then creates new rows for all necessary records using the new start and end dates that y ou entered. If you did not enter a new ending date, the end date of the selected record is used as the end date on the new records.
You can then make any additional changes to the new records directly in the grid. When you are finished, click OK to save your changes.
When you save your changes, the system updates the Recalculate Lease Liability field on the lease as follows:
1: Remeasure
You must run the remeasurement process on the lease to continue with balance sheet lessee accounting processing. This action is available when you make any change to a leased asset that impacts the existing amortization schedules.
2: Terminate or Remeasure
You must run either the early termination or the remeasurement process on the lease to continue with balance sheet lessee accounting processing. This option is available when the only change to the lease is that the recurring billing end date is changed to a date earlier than the original end date, and the lease is at a lease liability status of 40 (Commencement Complete).
Run the remeasurement process to recalculate amortization schedules based on your changes, and if necessary, create remeasurement journal entries to adjust previously reported amounts.
Run the early termination process to end the lease earlier than planned, keep the original amortization schedules, and if necessary, create termination journal entries at the end of the lease. This process is available only if the Recalculate Lease Liability field is set to 2.