Lease Asset Proposal and Generation

After creating the lease journal to recognize the right-of-use asset and lease liability, the asset can be created from the Asset Proposal and Manage Asset Proposal page. The Lease record status will be set to Asset Proposed or Asset Created.

If an asset is generated from a lease record, the Asset is Leased box on the asset record will automatically be checked. The Lease subtab on the Asset Record will contain information about the lease, and a link to the lease record. For more information about generating an asset from a proposal, see Asset Proposal and Generation.

The lease information from the lease record will be carried over to the Lease tab of the asset record. The Lease tab will show the following information:

• Lease record link

• Lease Company

• Lease Contract Number

• Lease start and end dates

• Finance Lease checkbox

• Rental Frequency

• Lease Term

• Annual Interest Rate

Note:

Existing Lease fields will not be used and will be set to deprecated.

Initial Measurement of the Right-of-Use Asset

The right-of-use asset is equivalent to the net present value of the lease.

For a finance lease, the residual value (RV) of the asset is equal to the residual value percentage (RV%) set in the asset type multiplied by the current cost. If the right-of-use asset is proposed and generated from a lease, the RV% is the same as the RV% set in the asset type.

For an operating lease, the RV of an asset that is proposed and generated from a lease is equal to the total interest amount of the lease, shown as a negative amount. The RV% is calculated as the residual value divided by the asset current cost.

Re-measurement of the Right-of-Use Asset

The re-measurement amount of the lease liability is the same as the adjustment made to the right-of-use asset. The calculation for the lease modification adjustment is also the same for finance and operating lease. The write-down adjustment is calculated as the difference between the following:

• The lease liability balance at the effective date of modification

• The new net present value using the modified terms of the lease

If an operating lease asset is modified, the RV is calculated as the total interest of the modified lease, shown as a negative amount.

Note:

You should use Straight Line Remaining Depreciation Method because the depreciation after modification is computed based on the current net book value or remaining life. If you use other depreciation methods, the depreciation after modification is computed as Current Cost divided by the Asset Life.

General Notices