Lease Accounting There are two types of lease accounting acc ounting capital lease and operating lease, unlike capital lease operating lease is shown on the balance balan ce sheet of the lessor (one who owns o wns the asset that is leased to someone else) in all operating leases. in the case of the capital lease , whether the leased asset will be on the balance sheet of lessor or lessee (one who makes use of o f the asset but is not the owner) is determined by several factors that will differ whether the lease is with or without purchasing options for the lessee. In A! the component is "I#LA (also unknown as "I#AA#L$), lease accounting can process leases and will enable automatic asset related postings in "I#AA and contract#related accrual postings in "I#%&L, as well as the re'uired one#time one#time lease postings. The lease accounting engine ("I#LA)you can use "I#LA to process the leases in the A! *$ system using the 'uotations and contracts functionality and price them using I! (Internet !ricing and onfigurator) and "i$a ("inancial $athematics in Leasing). The "I#LA works by finali+ing a lease contract, *$ billing generates the illing *e'uirement Items (*I) and using the *$ application Transaction TaTa- ngine (*$ TT) that can be integrated with third#party ta- solutions like erte- and you can then calculate the lease ta-es on the leases. /ou /ou can use u se contract A&* and A&! to handle lease receivables and cash, then you can use reporting tools to obtain the information about the leases. 0e will will cover the following in this section •
Lease accounting engine ("I#LA)
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asic settings
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alue determination
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!roduction setup
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*eports
Lease Accounting Engine (FI-LAE)
The Lease Accounting ngine ("I#LA) is integrated with A! *$ to control and manage the entire transactions postings in "I#LA, at the center of lease acco unting the LA picks up the contract values automatically from the *$ contract when a new lease is created or if there has been a contract change in the *$ system, and then classifies the lease as a operating lease or a capital lease with or without argain !urchase 1ption (!1). The necessary postings are then made in "I#AA for the asset creation and capitali+ation on the basis of customi+ation settings, when you have defined and assigned the accounting principle to the company code for parallel p arallel accounting, the LA can support valuation lease assets for both
book depreciation and ta-ation purposes, when changes are made the LA updates the "I#AA with the details on lease terminations, lease e-tensions, etc. 0ith the valuation rules defined, the LA performs accrual postings automatically in "I#%&L, it also posts one#time accounting entries such as inventory relief.
Basic Settings
0e need to define and assign a few basic settings to configure lease accounting, we will start with assigning the account principle to the company code using transaction 0FILA006_1 , remember we have already defined the accounting principle to be used for parallel accounting in section "inancial %lobal ettings and ompany ode !arameters, !arameters, to facilitate parallel valuation of lease assets we need to associate each participating company code to at least one accounting principle, select "ILA as the leasing component on the initial screen,
/ou /ou need to set the appropriate application component of "I#AA using transaction 0FILACOMPSET , we set this to "ILA
2e-t we create the company code grouping key using transaction code 0FILA008_1 , you create the group key to represent all the company codes in the same country or geography
2e-t we assign the company codes to the company groups using transaction code 0FILA008_1 ,
The ne-t step we assign the interest calculation method to company code, you can use the interest calculation method (345&345, 345&346, Act&344, etc) which determines the number of days between two calendar dates and effective interest method (such as linear or 7 method for use in "i$a) to be used per company code per accounting principle, the e-ample i used above 345&345 means that this is the european market, 345 indicates that a year contains 345 days on the basis of 35 days per month. The assignment of the interest calculation method together with the effective interest method helps "i$a calculate the annuity and present values. 0e will will use transaction code 0FILAI!CM_1 ,
2ow we will specify the dates for posting, you can specify how the various dates (installation (installation date, contract start date, contract end date, etc) of a lease are revenant revena nt for posting (asset value date for e-ample) are to be transferred from leases to accounting, we can use transaction code 0FILA00"F_1 ,
#a$ue #a$ue %ete&'ination
The value determination decides the values value s that need to be transferred from *$ contracts to "I and it occurs through the value I89s, which carry the information about the origin of a value ((from a contract item, material master record, customer master record, condition types, etc) and its functions (such as amount financial and residual value) to LA, the lease LA then determines the values from the *$ contract and forwards them to "I. 0e first create the value I89s using transaction 0FILA00_1 , A! supplies a number of values I89s which you can use (prefi- will be :), you can also create your own if necessary
2e-t we transfer the values from the contract item and master records (material (material or customer), we will use transaction code 0FILA00"#_1 ,
/ou /ou can also a lso transfer values from the material master or customer master to the value I89s for further processing in "I#LA •
5"ILA55;<= # transfer values from material master records
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5"ILA55;<> # transfer values from customer master records
2ow we will transfer the values from the condition types using using transaction code 0FILA00_1 , the amount identifier will determine if the transferred value is something like interest amount or repayment, the flow category distinguishes the value flow such as an interim payment (like a down payment) from regular periodic repayment. •
cnt* # condition types
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+$o,c # flow category
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a$ue i. # the value I8
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// # periodic payment indicator
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I% # amount identifier
To determine determine the present value (!) of a leased contract you need to maintain the interest rate and a base value, we can use transaction code 0FILA00_ , the use column either can determine the base value (use ? @) or interest rate (use ?=)
/ou can also use a formula to create new value I8s for e-ample by adding two values I89s, however the value I89s in 'uestion have h ave to be either both numeric nu meric or alphanumeric, the system will perform @5 iterations before it throws an error, you can use transaction code 0FILA00_1 ,
/ou /ou can also use substitution to determine the value, you can determine a range of comparison or calculation operations to determine values, you first define a base structure, substitution rule and settings for value transfer for base structure Man.ato&* Settings
0hen you complete the mandatory settings the system will automatically create value I8s with the prefi- : and transaction types for automatically generated gener ated asset transactions, based on the customi+ing settings in the previous steps, you must do this otherwise you will not be able to post automatically, automatically, we will use transaction code 0FILAALO_01 , once you have confirmed all the details you select " to generate the log, then you can complete the production setup by double#clicking complete on the resulting screen, the system s ystem will then generate the additional value I8s and the asset transaction types automatically au tomatically..
!e/o&ts
There are a number of reports that you can use •
S_B_"600028 # calculated (accrual engine display calculated accruals)
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S_B_"60002" # posted leased accruals (accrual engine display calculated)
/ou can enhance the reports by adding &changing the nodes in the logical database "ILA using transaction code 0FILAST!3C_L%B_ITEMS , you can assign a ssign value I89s to fields of the logical database using transaction code 0FILAL%B000_00 .
