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.