You can use the Lease Details window and the Lease Payments window to perform the following tasks:
Enter a Lease
Enter a Payment Schedule
Create an Amortization Schedule
Use the Lease Details window and Lease Payments window to define new leases. You cannot update or delete leases that are in use.
If you want Oracle Assets to test your lease to determine whether to capitalize and depreciate assets assigned to it, enter information in the Capitalization Test region of the Lease Details window. If you have already defined a payment schedule for your lease, attach it to the lease in the Lease Details window. Otherwise, you can navigate to the Lease Payments window to define a payment schedule and to calculate the present value of your lease payments. Oracle Assets depreciates Capitalized leased assets and expenses Operating leased assets. Oracle Assets will capitalize and depreciate leased assets if any one of the following criteria is met:
Test 1: The ownership of the asset transfers to the lessee at the end of the lease
Test 2: A bargain purchase option exists
Test 3: The term of the lease is more than 75% of the economic life of the leased asset
Test 4: The present value of the minimum lease payments exceeds 90% of the fair market value of the asset at lease inception
When you add leased assets using the Detail Additions process, you can attach the assets to leases you have previously defined. You can assign multiple assets to the same lease.
Use the Lease Payments window to enter information Oracle Assets uses to calculate the present value of a given set of lease payments, or to analyze alternative leasing structures. After saving a payment schedule, you can attach it to a lease defined in the Lease Details window.
You create amortization schedules to allocate capital lease payments between principal and interest based on the effective interest rate implicit in the lease contract.
Open the Lease Details window.
Enter the Lease Number and a Description.
Enter the Lessor.
Enter the Lessor Site, which is the location to which the payment will be sent. This field is required if you plan to export lease payments to Oracle Payables.
Choose a Lease Type of Capitalized or Operating. If you have already performed a capitalization test on this lease, you can use this field to manually override the test result displayed in the Test Determination field. Only capitalized leases can be set up for automatic lease payment to Oracle Payables.
You can choose from a list of predefined Payment Schedules to attach to this lease, or leave this field blank and choose the Payment Schedule button to define a schedule for this lease. See: To define a payment schedule.
If, after the lease start date, you want to change existing lease payments, you must enter a new lease, or manually adjust the individual payment lines to change the existing lease.
Enter the payment account. This field is required if you plan to export lease payments to Oracle Payables.
You must enter a lessor site before you can enter a payment account. This is because the lessor site determines the operating unit, which in turn determines the account structure.
Optionally enter a payment term.
Note: We strongly recommend that you set up an immediate payment term in Oracle Payables, and that you apply the Immediate payment term to any leases that will use the Exporting Lease Payments feature in Oracle Assets. If this payment term is not provided, then Oracle Payables defaults to the payment term associated with the lessor site. This can cause the payments to be issued late by Oracle Payables. See: Payment Terms.
Enter the Currency you are using for this lease.
If you want to test this lease for capitalization, enter the following information in the Capitalization Test region:
Check Transfer of Ownership if the lease transfers ownership of the asset to the lessee at the end of the lease.
Check Bargain Purchase Option if a bargain purchase option is included in this lease.
Enter the Lease Term and the Asset Life in months for the leased asset. The Criterion Met check box indicates whether the term of the lease exceeds 75% of the economic life of the leased asset.
Enter the Fair Value of the leased asset.
Optionally enter the Present Value of the leased asset if you have previously calculated it outside of Oracle Assets. Otherwise, Oracle Assets will automatically populate this field when you select a lease payment schedule for the lease. The Criterion Met check box indicates whether the present value of the minimum lease payments exceeds 90% of the fair market value.
If you need to define a payment schedule for this lease, choose the Payment Schedule button. See: To define a payment schedule.
Oracle Assets displays the result of the capitalization test in the Test Determination field. If the lease qualifies for capitalization, Oracle Assets automatically populates the Cost to Capitalize field with the lesser of the fair value of the asset or the present value of the minimum lease payments. This amount also appears as the Current Cost for the asset in the Books window when you perform an asset addition.
Choose Done to save your work.
If you are defining a new lease in the Lease Details window, choose the Payment Schedule button. Alternatively, open the Lease Payments window directly from the Navigator window.
Enter the date the lease begins. This date must coincide with the first day of the month.
Enter the Interest Rate. The interest rate is the lesser of the lessee's incremental borrowing rate or the rate implicit in the lease contract.
Enter the Currency you are using for this payment schedule.
Enter the Compounding Frequency you want to use. For annuity events, select monthly, quarterly, semi-annual, or annual payment periods.
If you change the Compounding Frequency, Oracle Assets automatically recalculates the End Date for each payment line, but does not change the Start Date.
Enter one or more payment lines for your payment schedule. You can enter any combination of lump sum lease payments and annuities (homogeneous series of lease payments).
Start Date: Enter the date of this payment. The payment date should be the first day of the month.
Amount: Enter the amount of the individual lease payment.
You can leave this field blank for one of the payment lines, and allow Oracle Assets to calculate the amount for you. If you leave this field blank, you must specify a present value for the payment schedule in the Present Value field.
Number: Enter the number of payments you want to make as part of this event.
Payment Type: Choose a payment type of Annuity, Balloon Payment, Bargain Purchase Option, or Bargain Renewal Option.
End Date: The Compounding Frequency, Start Date, and Number of payments you enter determine the end date.
After you have defined the payment schedule, choose the Calculate button. Oracle Assets calculates the present value of the payment lines you entered.
When you save the payment schedule and return to the Lease Details window, attach the payment schedule to the lease. Once you attach a payment schedule to a lease, you cannot change it.
Save your work.
Once you have calculated a lease payment schedule, choose the View Amortization button to create an amortization schedule for the lease. The difference between the present value of the minimum lease payments and the total amount to be paid under the lease represents the interest expense that must be recognized over the life of the asset.