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Expense Lease: Accounting Standard

Use this page for expense leases that have regular charges that use the lease accounting standard functionality (e.g., use ASC 842/IFRS 16).

Add Direct Cost or Incentive

For each direct cost or incentive line you add, follow these steps:

Select the Type and select the Amount Type for applying the direct cost or incentive.
Specify the Start date, and for a recurring direct cost or incentive, specify the End date.
Specify the Amount.

The lines in the Amortization Schedule FastTab are updated based on the incentives or direct costs added.

Create the Initial General Journal Entry

To create the initial general journal entry, follow these steps:

Edit the Header and Direct Cost and Incentives sections as needed.
Review the updated Amortization Schedule.
Select Actions > Initial journal process.
In the dialog, specify the date on which the initial general journal is processed. If needed, specify a comment.
Select OK.
After the initial general journal entry is created, the journal document number is added to the line in the Audit FastTab. You can then select the document number to review the details of general journal.

Remeasure the Lease Liability and ROU Asset Amount

If an expense lease is modified after the initial journal entry is created, the lease liability and ROU asset amount must be remeasured or recalculated. Changes to the lease can include, but are not limited to the following:

The discount rate or other values on the PLM Lease are changed
Escalation or abatement lines are added
Direct costs and incentives are added
The economic life, residual amount, or purchasing option amount are changed in the Header

To remeasure the lease liability and ROU asset amount for a lease, follow these steps:

Perform any of the changes as described, and process them on the Charge Details page.
Select Actions > Remeasure.
In the dialog, specify the date on which the remeasure is processed. If needed, specify a comment.
Select OK to remeasure the lease liability and ROU asset amount.

The Amortization Schedule is updated and a line is added to the Audit FastTab. To review the details of the remeasure, select the document number.

Field boxes on the header are read-only except for the ROU asset adjustment, economic life, residual amount, and purchasing option.

Header Information Table
Field	Description
Start Date	Displays the reporting start date for the lease accounting standard.
Incentives	Displays the total sum of the lease incentives from the amortization schedule.
Initial Direct Cost	Displays the total sum of the initial direct costs from the amortization schedule.
Net Present Value	Displays the net present value, which is calculated as the sum of the Amount for periods with same discount rate and modification date
Lease Liability	Displays the liability for the lease.
ROU Asset	Displays the remaining ROU asset balance.
Lease Expense	Displays the lease expense amount per period. This value is calculated as follows: Lease liability/economic life. Amortization expense applies to financial expense leases. Lease expense applies to operating expense leases.
ROU Asset Adjustment	Specify the ROU asset adjustment amount.
Economic life	Displays the economic life of the asset for the life of the lease. This value is equivalent to the total number of periods in the lease, which is calculated based on the start and end dates of the lease. The economic life applies to financial expense leases. Currently, only economic life equal to lease term is supported. Updating the economic life does not currently work.
Residual Amount	Specify the residual amount of the asset at the end of the lease. This value can be edited any time during the life of the lease and does not affect periods that have already been processed (e.g., stubbed or had the invoice created).
Purchasing Options	Specify the purchasing options (or buyout) amount of the asset at the end of the lease. This value can be edited any time during the life of the lease and does not affect periods that have already been processed (e.g., stubbed or had the invoice created).

Direct Cost and Incentives

Use this section to specify the direct cost or incentive amounts for the lease. Theses values can be changed in one of following situations:

The initial journal entry has not been created.

When the amount is changed, the ROU asset amounts and initial journal entry are recalculated.

The initial journal entry as been created, but the invoice or stub for the period has not been created.

When the amount is changed, a warning message appears. If you choose not to change the amount, all values remain as is. If you choose to change the amount, the initial journal entry is reversed with the same date, the ROU asset amounts and initial journal entry are recalculated, and a new initial journal entry is created.

If the invoice or stub for the period already exists, this amount cannot be edited.

The following field boxes are available:

Direct Costs and Incentives Table
Field	Description
Type	Select the type: Incentives or Direct cost.
Amount Type	Select how the incentive or direct cost is applied: Lump Sum or Recurring.
Start date	Specify the start date for the incentive or direct cost. Required. The default date is the term date.
End date	Displays the end date of the incentive or direct cost. The end date is required for a recurring incentive or direct discount.
Amount	Specify the incentive or direct cost amount.

Amortization Schedule

This schedule shows the economic life of a right-of-use (ROU) asset during the life of the lease. The discount rate on the PLM Lease is applied to the amortization schedule. Changing the values on the Header updates the amortization schedule.

The ROU amortization schedule includes the following information.

Period (increasing sequence number starting at zero)
Start and end dates
Amount
Present value
Interest paid and expense
Lease liability balance (decreasing by Amount - Interest expense)
Lease expense and amortization component
ROU asset balance (appears when Use ROU Accumulative Amortization Account is turned off)
ROU asset accumulative amortization (sum of all existing amortization expense values) (appears when Use ROU Accumulative Amortization Account is turned on)
ROU asset net book value (appears when Use ROU Accumulative Amortization Account is turned on)

Audit

This audit table shows all changes made to the lease that affect the values used by the lease accounting standard.

The following field boxes are available:

Audit Table
Field	Description
Start Date	Displays the start date of the lease.
Discount Rate	Displays the discount rate (from the PLM Lease) applied to the lease.
Lease Term	Displays the number of months in a billing period of a lease term.
Economic Life
Present Value	Displays the net present value of the lease.
Lease Liability	Displays the value of the lease.
ROU Asset Bal	Displays the ROU asset value for the lease.
ROU Asset Adjustment	Displays the ROU adjustment amount for the lease.
Lease Expense	Displays the amortization or lease expense for a period.
Lease Incentives	Displays the lease incentives for the ROU asset.
Initial Direct Cost	Displays the indirect costs for the ROU asset.
Purch. Options	Displays the purchasing option amount for the ROU asset.
Residual	Displays the residual amount for the ROU asset.
Document No.	Displays the document number for the processed amounts for the lease accounting standard.
Reversal Journal Number	If the journal entry is reversed, displays the journal number for the reversal.
Comment	Displays the comment for the journal batch.
Date	Displays the date on which the change occurred.
842 Start Date	Displays the start date for the lease accounting standard.
Reporting Start Date	Displays the reporting start date for the lease accounting standard.
Is Initial Period	Indicates whether the transaction is for the initial billing period.

Actions

The following actions are available:

Actions Table
Action	Description
Create Initial Journal Entry	Opens a dialog where you specify the date on which the initial general journal is created. You can also specify a comment for the general journal. When you select OK, the initial general journal for the ROU asset is created. This action is available only when the initial general journal has not been created.
Remeasure	Opens a dialog where you specify the date on which the lease liability and ROU asset are remeasured based on various changes made. You can also specify a comment for the remeasure. Only the periods that have not been processed are affected by the remeasure. If an expense lease is modified after the initial journal entry is created, the lease liability and ROU asset amount must be remeasured or recalculated. Changes to the lease can include, but are not limited to the following: The discount rate or other values on the PLM Lease are changed Escalation or abatement lines are added Direct costs and incentives are added The economic life, residual amount, or purchasing option amount are changed in the Header