Terminate Lease Contract
Explanation
This activity is used to terminate the lease contract by clicking Terminate Lease Contract
on the Lease Accounting
Contract page.
Prerequisites
In order to terminate a lease contract, the following must have been completed:
- A fixed asset object of type Right-of-use must have
been connected to the lease contract.
- Status of the Lease Contract should be in the status Active.
- Lease Accounting Periodical Proposals
must have been created and posted for the required accounting period(s)
until the Termination Date.
- Lease Accounting Payable Proposals
must have been created and posted for the installment(s) due until the
Termination Date.
- If the Leasing Type of the contract is Finance,
depreciation proposals must have been created and posted for the required
accounting period(s) until the Termination Date.
- The Posting Types FAP 81, FAP 82, FAP 83, FAP 84, FAP
85, FAP 86, FAP 87, FAP 88, FAP 89 and FAP 90 must have been defined in
Posting Control page.
- A voucher type with Function Group A must have been
defined in Voucher Type page.
-
If the
Leasing Type
of the contract is Operating and the
contract currency is
different to the accounting or parallel currency, the automatic termination
postings cannot be created. For such contracts, the termination should be
handled manually.
System Effects
As a result of this activity:
- Amounts suggested for the Balances-Lease Liability,
Balances-Right of Use Asset and Posting Information
are based on the given Termination Date.
The calculations and values of each category are explained below.
Balances - Lease Liability
The lease liability balance in contract, accounting and parallel currency
of the lease contract by the termination date are shown here.
The values are not editable.
Balances - Right of Use Asset
Acquisition: The balances of the right of use asset in
accounting and parallel currency by the termination date are shown here. The values are not editable.
Depreciation/Amortization: The accumulated
depreciation/amortization balances of the right of use asset in
accounting and parallel currency by the termination date are shown here.
If the Leasing Type of the lease contract is Finance, these fields show
the accumulated depreciation balances in accounting and parallel currency
based on the book specified in the Book ID field. If the Leasing Type of
the lease contract is Operating, these fields show the balances of the Periodical
ROU Asset- Amortization in accounting/parallel currency posted through the
Lease Periodical Accounting Proposal(s) for the respective lease contract.
The values are not editable.
Net Book Value (NBV): The net book values of the right
of use asset in accounting and parallel currency are shown here. These values are the respective acquisition value in accounting/parallel
currency minus respective accumulated depreciation/amortization balances
in accounting/parallel currency. The values are not editable.
Posting Information
Currency Differences Gain/(Loss): The total realized
currency gains or losses pertaining to the lease liability in accounting
and parallel currency by the termination date are shown in this field. This
happens in foreign currency contracts where the Recognition Postings are
created at one rate and the Lease Accounting Proposals are created at different
rates. In such instances, when calculating the currency gains/losses, the
lease liability is re-calculated at the accounting/parallel currency rates
prevailed when creating the Recognition Postings. Then the difference between
the actual lease liability balance (shown in the Balances-Lease
Liability group box) and such re-calculated lease liability balance
is considered as a Currency Difference- Gain/(Loss) in
the Terminate Lease Contract dialog.
Termination Gain/(Loss): The difference between the
Lease Liability and the Net Book Value
of the right of use asset in the respective currency is shown here.
Example:
The values (hypothetical) given in the following example are in accounting
currency only and the same is applied for parallel currency.
Lease Liability: CU 1250 (A)
Right of Use Asset- Acquisition: CU 1000 (B)
Right of Use Asset- Depreciation/Amortization: CU 600 (C)
Right of Use Asset- NBV: D = B - C
= (1000-600)
= CU 400
Currency Differences- Gain (Loss): CU -250 (E)
Termination Gain/(Loss): F = (A - (E)) - D
= (1250 - (-250)) - 400
= CU 1100 (Gain)
- Voucher(s) is/are created and transferred to the hold table in
IFS/Accounting Rules.
In termination, the existing values in the lease liability, right-of-use
asset-acquisition and accumulated depreciation/amortization should be cleared.
The remaining balances arising from clearing these balances are posted as
Termination Gain/Loss after adjusting the respective currency differences,
if any. A summary of the postings in Termination of Lease Contract is explained
below using the values in the example explained above.
|
Posting Types- Termination of Lease Contract |
Description |
Balances/Values per
Account |
| 2398- Lease
Liabilities |
1265- Right-of-use
Assets |
1275- Accumulated
depreciation on ROU Assets |
9385- Lease
Termination Interim Account |
7968- Currency
exchange losses on lease liabilities |
3978- Lease
Termination gains |
| Balance before Termination |
-1250 (Cr) |
1000 (Dr) |
-600 (Cr) |
|
|
|
| FAP 81 |
Clear lease
liability balance |
1250 (Dr) |
|
|
|
|
|
| FAP 80 |
|
|
|
-1250 (Cr) |
|
|
| FAP
0 |
Clear acquisition
value |
|
-1000
(Cr) |
|
|
|
|
| FAP 80 |
|
|
|
1000 (Dr) |
|
|
| FAP 0 or FAP 82* |
Clear dep
value |
|
|
600 (Dr) |
|
|
|
| FAP 0 (New Asset) |
|
|
|
-600 (Cr) |
|
|
| FAP 89** |
Currency
difference- loss |
|
|
|
|
250 (Dr) |
|
| FAP90** |
|
|
|
-250 (Cr) |
|
|
| FAP 83*** |
Termination
Gain |
|
|
|
|
|
-1100(Cr) |
| FAP 84*** |
|
|
|
1100 (Dr) |
|
|
| Balance after Termination |
0 |
0 |
0 |
0 |
250(Dr) |
-1100 (Cr) |
* FAP 82 posting type is created instead of FAP 0 posting type, if the
Leasing Type is Operating on Lease Accounting Contract/General
tab.
** If there is a gain from currency differences, FAP 87 and FAP 88 will
be created.
*** If there is a loss from termination, FAP 85 and FAP 86 will be created.
- The status of the lease contract is set to Closed
and the connected FA object status is set to Scrapped.