Lease Asset Proposal and Generation

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

If an asset is created from a lease record, the Asset is Leased box on the asset record is automatically checked. The Lease subtab on the Asset Record shows 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 information from the lease record carries over to the Lease tab of the asset record. The Lease tab shows the following information:

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 equals the net present value of the lease.

For a finance lease, the asset's residual value (RV) equals the residual value percentage (RV%) 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% in the asset type.

For an operating lease, the RV of an asset that's proposed and generated from a lease equals the total interest amount of the lease, shown as a negative value. 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 for the lease liability matches the adjustment made to the right-of-use asset. The calculation for the lease modification adjustment is the same for finance and operating leases. 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 lease terms

If you modify an operating lease asset, 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, depreciation after modification is calculated as Current Cost divided by the Asset Life.

General Notices