About Lease Agreements
Before creating any lease agreements, you must have created a relevant Entity, Counterparty, Portfolio, Cost Center, Bank Accounts and Lease Types. Following this step, you can proceed with creating Lease Agreements.
Under lease, type that you can determine the interest calculation method (compound or simple) for your leases.
Please note that new lease agreements can be imported from excel, created manually (explained in Create New Lease Agreement section below), or just by copying an existing one.
When a lease agreement expires, it goes into ‘Lease->Archive’, meaning that all your agreements that have reached an end date can be found there. When you run reports to history periods, the data will, of course, come correctly from archived leases as well.
Please note that you have the possibility to send notifications to yourself via email when an agreement is about to expire. To have these notifications activated, you must go under your own User Rights section and specify from which modules and how many days prior you want the messages to come into your email. The system will read "Contractual end date" for this notification.
EXCEL IMPORT FOR LEASES
Click the first ‘Import Lease tab’ in the lease register. Following this step, from the ‘Download sample’, you can get the import excel template that you can use for the import.
All mandatory fields are marked with green background, so you can easily seen which are the columns that need some input.
In the template, you should find all important fields related to a lease agreement. It is important that all data is named exactly the same way in excel as it is in the system. Note that last ‘Column AA’ means the bank account of the lease. This impliesit should have the exact same name as the bank of that transaction. If you bring the interest rate for a lease in the excel, do not use any %-sings in the field. So 8 % should be in the excel 8.
You can bring 100 lease agreements at once. It is always good to check a couple of lease after the import.
Don’t forget to check the date formats to make sure they are correct: yyyy-mm-dd.
Following this step, bring in the rest of the leases that were not imported initially.
COPYING A LEASE AGREEMENT
When you copy a lease agreement, please note that you’ll be copying the basic information of the agreement. After checking that everything is fine, you need to create the lease flow for the copied lease. The process is further explained in the lines below.
Creating a lease agreement manually
Click on (1) Leasing > Register > "Add new".
Update all fields that are relevant to your lease. All mandatory files will be filled with the red asterisk (*)
1) An Entity is the company doing the reporting. (New Companies can be created under Settings > Companies).
The IFRS accounting tick box is automatically checked if you selected IFRS accounting when you created the company, and can be changed in Settings > Companies.
*If you don't want to do IFRS16 accounting for this particular lease, untick the box and the liability, along with the asset value this standard requires to not be calculated.
2) The Counterparty is the Lessor. (New Companies can be created under ‘Settings > Companies’ and by selecting ‘Counterparty).
3) The Portfolio helps to categorise your data in reports. (New portfolios can be created under ‘Settings > Portfolios’).
4) The Cost center helps to categorise your data in reports. (New Cost centers can be created under ‘Settings > Cost center’).
5) The Fixed asset lease amount is the share of your lease cost that is directly linked to a fixed asset.
- Then select the currency (CCY) of the lease.
- Once a Currency is selected, the system will offer all appropriate bank accounts from the ACCOUNT drop down menu.
If you need a currency to be added to the system, please contact support and we will add that currency for you. Once the currency has been added, you would also need to add an appropriate bank account for this new currency under ‘Settings > Bank Accounts’.
6) Add all maintenance or services included in the lease to Services included in the lease, if you have them.
7) Total fixed payments are automatically calculated and need to be the total lease cost of this asset.
- i.e. If your monthly lease cost is 1000€ a month and 100€ of that cost comes from maintenance, input (5) 900€ and (6) 100€ and (7) will be 1000€.
8) The Lease type is linked to an asset group the lease belongs to. (New types can be created under ‘Leasing > Lease types’).
9) Interest rate % will be automatically defined by your ‘Company Settings’. But it can also be changed here if needed.
10) Customer reference is the defining reference used to find the lease in the register.
11) Commencement date is the start date of the lease (selected from the calendar). The system will automatically change the Start date to the first day of the starting month.
12) End date is the end date of the lease (selected from the calendar). The system will automatically change the End date to the last day of the final month.
If you have made a decision to extend the lease of a certain asset, but have not yet finalised the agreement, then the extended lease end date should be inputted here.
13) The Contractual end date (CED) is by default the same as the Lease End date (12). If this is the case, it can be left blank.
In the situation described above (12), where the contractual end date and IFRS 16 end date do not match, input the current contractually agreed end date. You will then receive email alerts of maturing leases based on this contractual end date.
To change your email alerts go to your ‘Profile > User details’. Select the checkbox for Maturing leases notifications and select the number of days prior for notifications from the drop down menu.
14) First payment month is the month of the first payment after the Lease Start date. Select the date from the calendar. The system will automatically change the First payment date to the last day of the starting month.
15) Select the number of Payments per year. (monthly (12), quarterly (4) etc...).
16) Payment day is used to automatically adjust your payment days for all payments.
If you need to adjust how Payment day responds to falling on a weekend, under leasing > lease type select Edit for the appropriate lease. Following this step, click the drop down menu next to *Business Day Convention and select 'Previous' (for working day before Payment day), 'Following' (for next working day after), or 'No Adjustment' to leave it as is.
Under the Lease Liability you’ll find a drop down where you can enter additional payment values that will have an effect on your Lease Liability and your Right-of-Use asset:
Exercise price of a purchase option(17), Residual value guarantee(18) and Penalties for terminating the lease(18).
If you input values here then you need to be certain that you will execute these at the end of your lease term. Your liability amount will show these values at the end of the lease term, which you then need to write off on your Balance Sheet containing these payments.
Under Right-of-Use Asset you’ll find a drop down where you can enter additional values that have affect only on the Right-of-Use asset:
Lease Payments made on or before start date (20), Initial direct cost (21), Estimated cost for dismantling restoring asset (22 - you need to have the discounted value here if you have some costs for dismantling your asset at the end of the lease term) and Lease Incentives Received (23).
24) Residual Value - If the Right-of-Use asset should have a value at the end of the lease, you can enter it here.
Click ‘Add new’ to save the new agreement
ADDITIONAL
You can add additional text to remember the agreement.
Usually ‘Move to archive’ before maturity and 'Excluded from Accounting and Reporting' will both be unselected. Tick both these boxes if you would like to move a lease to archive before maturity and you don't want it to appear in your reports or accounting.
The following text boxes are for accounting users: Internal order, tax and RoU asset number. You can save the text or number information to these, and then you can have them as one column in your accounting template for easy use when you import data into your ERP/Accounting system.
If you want the system to also calculate a valuation to the agreement, you can put the "Calculate valuation" functionality on active mode. Based on the interest rate set to the instrument, you will get a market valuation to your lease agreement in the ‘Lease Valuation Report’.
By putting"Cost center split" on active mode, you make it possible to split this agreement between many cost centers that you have in the system. After activation, you will see a separate COST CENTER SPLIT sheet in the agreement where you can specify the procentual split between the cost centers you choose.
Once the agreement is saved, you need to create a payment flow to have the numbers out of the agreement into reporting and accounting.
Click Payment schedule.
Generate Payment Schedule
If you have a normal lease with no special price increase conditions, simply check the automatically filled details in (1)-(5) below:
1) First payment month is automatically filled from the 'Lease Agreement' - 'First Payment month'.
2) Calculation start date is automatically filled from the 'Lease Agreement' - 'Commencement date'.
3) Fixed Asset Lease amount is automatically filled from the 'Lease Agreement' - 'Fixed Asset Lease amount'.
4) Lease Service Cost is automatically filled from the 'Lease Agreement' - 'Services included in lease'.
5) End date is automatically filled from the 'Lease Agreement' - 'End date'.
If your lease contains Price increases, you can define those by following the instructions below.
First define the Price increase interval. If, for example, the interval is yearly, then put 12.
The Date of the first price increase should be the last day the old price was valid (e.g. if your last payment with the initial lease payment value is in December 2020, then input here 31.12.2020. Following this step, the next payment will appear with the increased amount).
Input the ‘Negotiated Price Increase Amount’ here.
or
Input the ‘Negotiated Price Increase Percentage’ here.
Then, click on ‘Generate’ to create the lease flow.
If you are happy with the lease flow, click ‘Save’. Your lease flow is now viewable under the lease agreement.
If you would like to alter the details, click ‘Clear all' and alter the Payment schedule as above.
If there are single payments in your lease flow that do not match the normal leaseflow, you modify single payments after the lease flow creation. Once the lease flow has been created you can go to each payment by clicking the pen symbol next to each payment. The last step is to modify the payment value and click ‘Save’.
ATTACHMENTS
Here you can save documents in excel, pdf, jpg, jpeg and png up to 5mb. Characters a-z A-Z 1-9 or - _ are only allowed in attachment file names.
LEASE CHANGES
Lease changes are explained in a separate document titled "Lease Change ".
AUDIT TRAIL
Within the ‘Audit Trail’ functionality, you can save all the changes made to the agreement.