Balance Adjustments

Introduction

LeaseAccelerator supports the import of account balances or adjustments to system-generated balances as a self-service Bulk Import in the UI. It is intended as a true-up to reflect the ERP balance, therefore it is the user's responsibility to obtain and import the correct data. This import is intended to be used one time per schedule for a given standard and account. However, we understand that there may be scenarios where managing the Balance Adjustment is necessary, and in 24R1, we introduced tools to assist in making changes to these adjustments.

Balance Adjustment imports are primarily for clients who did not enter a lease's complete history during implementation and may have unreconciled differences between historical accounting records and LeaseAccelerator.

Download a PDF version of the guide.

Clients who implement LeaseAccelerator after adopting the new accounting standards and have existing balances may also find this feature helpful when entering leases on a go-forward basis. With this import feature, users may adjust the LeaseAccelerator calculated balance directly and eliminate General Ledger to Subledger reconciling differences. These differences may arise due to incomplete data or varying practices or configurations used before implementing LeaseAccelerator.

There is currently no guardrail preventing the import of a balance adjustment import that would result in a negative ROU. Again, it is the user's responsibility to provide the correct balance information to prevent negative ROU scenarios.

Important guidelines regarding selected effective dates are covered below. Terms included in this user guide include:

• ROU – Right of Use; The Finance Asset or Operating Asset account balance

• AFUD – Available for Use Date for a specific asset.

• SPTA – Reference to the Accumulated depreciation: Step payment timing adjustment - Operating Lease account.

• Mid-term Balance Adjustment – Balance adjustment recorded for any date other than the lease start date or transition date.

• Absolute Balance Adjustment – The stated amount will become the new account balance as of the date the balance adjustment is applied (see Importing: Guidelines and Behaviors below).

• Delta Balance Adjustment – The amount to be added/subtracted from the account balance as of the date the balance adjustment is applied (see Importing: Guidelines and Behaviors below).

Note: Alternatively, clients may adjust their General Ledger balance to match the LeaseAccelerator balance which would not require this feature.

Importing: Guidelines and Behaviors

The import feature allows the following:

• Adjustments can now be applied at lease inception, transition, or on the first day of a fiscal month.

  • If occurring in the first month of the lease, the lease start date should be used as the Effective Date on the import file.

    • For schedules with AFUD either prior to or after lease start date, Asset and Accumulated Depreciation balance adjustments representing beginning lease balances should be entered on the import file with the lease start date as the Effective Date. The system will automatically adjust the ledger date to equal the AFUD capitalization entry date.

    • Balance adjustments on schedules with multiple assets with different AFUD dates are not permitted with lease start date as the Effective Date on the import. These scenarios are supported with a mid-term balance adjustment.

      • No guardrail exists currently to block this scenario.

  • Selected fiscal month for Effective Date on the balance adjustment import cannot coincide with the same fiscal month in which another remeasurement event is included. (EX: renewal, recurring payment adjustment, impairment, etc.)

  • Imports for schedules that are fully terminated, disposed, or bought out will be blocked.

  • Balance adjustments should not be imported for any schedule with one or more assets fully impaired.

    • Impairment should be rolled back, the balance adjustment applied, and then the impairment readdressed if needed.

    • No guardrail exists currently to block this scenario.

• The following accounts can be selected on the import file: 

  • Accumulated depreciation - Finance Lease

  • Accumulated depreciation - Operating Lease

  • Accumulated depreciation: Step payment timing adjustment - Operating Lease

  • Allowance for Leased Asset Impairment-Finance Lease

  • Allowance for Leased Asset Impairment-Operating Lease

  • Deferred rent

  • Finance Lease asset

  • Operating Lease asset

     

• Adjustments can be made as either a Starting Balance (Absolute) or an Adjustment to the Calculated Balance (Delta).

• The following scenarios explain the feature's current behavior:

  • Balance adjustments recorded prior to a renewal or remeasuring payment adjustment will maintain the net difference between the liability and asset net book value after the remeasurement event.

  • Balance adjustments recorded prior to a modification will maintain the net difference between the liability and asset net book value after the modification.

  • For partial returns or buyouts on leases with a balance adjustment, an equivalent portion of the adjustment is closed out with the terminating entries. For leases with previously recorded partial returns or buyouts, newly recorded balance adjustments are allocated across the surviving assets.

  • Balance adjustments imported for schedules in Evergreen status will import successfully but have no effect on the accounting as the net book value would already be zero. The adjustment will not be considered for subsequent renewals. A new balance adjustment should be processed.

• Reports such as the Maturity Analysis Report and Quantitative Analysis Report that include the "IBR Type" column will continue to show "External Balance Adjustment" as the current "IBR Type" however the IBR will not change.

• The template to import adjustments is available in the Success Center and in Ask Alex.

Import Template Fields

User Interface

With the release of 24R1, we added the ability to manage and view Balance Adjustments.

Deal History

The Balance Adjustment now appears on the Deal History, History tile in the audit trail table. This event, labeled Balance Adjustment, has the date of import, the Responsible Party, and the Comment "Performed Balance Adjustment import."

Deal Summary

A New Feature related to a Balance Adjustment appears in this release. When a Balance Adjustment exists for a deal, users will see a new section below the Reclassify Events and above the Mid-Term/EOT Events section. If there is no adjustment, the section will not be present.

The format for the event is as follows:

"Calculated Balance for [[ACCOUNT_DESCRIPTION]] on [[ACCOUNTING_STANDARD]] adjusted {by|to} $1234.56; effective MM/DD/YYYY (will appear on reports run on as at dates on or after MM/DD/YYYY)"

• Where by represents a DELTA and to represents an ABSOLUTE.

  

  

• Multiple Account Descriptions and Adjustment Types in the same Balance Adjustment import for the same schedule will each show as a separate line in the new section with the corresponding Amount, Account Description, and Accounting Standard.

  

• Only one Balance Adjustment Event per schedule is allowed. If another Balance Adjustment is done, then it overwrites the existing one.

Removing a Balance Adjustment

To completely remove and rollback an existing Balance Adjustment, use the kebab icon to the right of the adjustment event in Deal Summary.

The Deal History Event, previously mentioned, will appear with a strikethrough when another Balance Adjustment is imported for the deal.

• The Responsible Party and an Annotation line with the Comment "Rolled back Balance Adjustment" appear.

The Deal History Document for the Balance Adjustment (formerly named Accounting adjustment) document will be marked with "Rolled back Balance Adjustment."

• With the new Comment regarding the deletion, "Balance Adjustment Rolled back on ||dd-MON-yyyy|| and cannot be edited. File retained for audit purposes."

The System Operations Console will show the events on the Booking tile.

• When an adjustment exists on a deal, and another import is done, only one booking event shows here because the deal only needs to be recalculated once as part of the entire process. Adjustments made before 24R1 are still named Accounting adjustment.

Note: An Asset Detail Import replaces assets on a deal. Users will see a warning during the Validation step informing them to reassess the balance after import.

Modifications with Balance Adjustment

There can only be one (1) Balance Adjustment in an entire modification chain when modifications include M00# deals. When only A00# deals are part of the modification chain, Balance Adjustments are not blocked.

• Balance adjustments are blocked on the original parent deal in a modification relationship, regardless of whether or not the parent has an existing balance adjustment. Imports on parent deals, in general, cause issues with the related accounting.

• Balance adjustments are blocked on the child deal in a modification relationship when an adjustment exists for the parent deal.

Examples:

1. Deal #123 has an adjustment recorded and was modified with Deal #123-M001. The M001 is not allowed to have an adjustment imported and will be blocked with an error at the Validation step. If you need to replace a Balance Adjustment on a modification chain, rollback the modification(s) to the primary deal in the chain.

2. Deal #123 has no adjustment recorded and was modified with Deal #123-M001. The M001 is allowed to have an adjustment imported and will not be blocked. However, if the M001 is modified to M002, then M002 will be blocked with an error at the Validation step.

Note: There will not be a Balance Adjustment event on the Deal Summary of the modification. In other words, the Balance Adjustment event only appears on the Deal Summary where the import was done.

Additional Guardrails

Impairment Related Events

A Balance Adjustment will be blocked from import if the effective date of an adjustment is in the same fiscal period as an existing impairment or impairment loss reversal.

An impairment or impairment loss reversal will not be allowed if the effective date is in the same fiscal period as an existing adjustment.

A Balance Adjustment will be blocked from import if, in any period, any asset on the deal is Fully Impaired.

Net Book Value (NBV) Protection

A Balance Adjustment will be blocked from import if any combination of Account Description, Adjustment Type, Amount, and Effective Date causes a negative NBV.

Error Message: [##Schedule Number##]: This Balance Adjustment results in a negative Net Book Value and is not allowed.

A Balance Adjustment will trigger an import warning if any combination of the adjustment values might potentially cause a negative NBV.

Caution: [##Schedule Number##]: This Balance Adjustment may result in a negative Net Book Value, and the account should be reviewed immediately.

Accounting Reclassifications

When a Balance Adjustment exists on a deal, an informational message will be visible on the Accounting Classification workspace. This message tells users they should review the accounting output after reclassifying if the accounting classification changes. Accounting classification changes can change the valid accounts for a deal.

Deal Status Behavior

Terminated/Disposed – A Balance Adjustment will be blocked from import if the deal's status is terminated, bought out, or disposed of. If the termination event has not yet occurred, meaning the end date has not passed, and the ledger date of the adjustment is before the termination event ledger date, then the import will be allowed.

Defunct – A Balance Adjustment will be blocked from import if the deal's status is defunct.

Retired – A Balance Adjustment will be blocked from import if the deal was retired/deleted.

Un-Booked – A Balance Adjustment will be blocked from import if the deal is not booked. This includes deals with Incomplete or Pending Approval.

Evergreen – A Balance Adjustment will be allowed for import if the deal is in Evergreen; however, a warning will appear to remind users to review the accounting after import.

Note: This warning is because a deal can be in evergreen and either be off the balance sheet or remain on the balance sheet.

Recorded Asset Events

Renewals

When recording a renewal on a deal and a Balance Adjustment exists on the deal, users will see a warning if the ledger date of the renewal event is before the ledger date of the adjustment or if it is in the same fiscal period as the adjustment.

Partial Termination or Disposal

When recording a backdated partial termination or disposal of assets and an adjustment exists on the deal, users will see a warning if the ledger date of the termination event is before the ledger date of the adjustment or if it is in the same fiscal period as the adjustment.

Payment Adjustments

When recording a remeasuring payment adjustment and a Balance Adjustment exists on the deal, users will see a warning if the ledger date of the payment adjustment is in the same fiscal period as the adjustment.

Note: Balance adjustments are made by standard, not by ledger.

The following are the conditions that will bring up the warnings:

1. If the deal has a Balance Adjustment for IFRS 16 only, the payment adjustment is recurring, and the Reason For Change is Underlying index rate change.

2. If the deal has a Balance Adjustment for ASC 842 and IFRS 16, the payment adjustment is recurring, and the Reason For Change is Contingent rent resolved.

Effective Date

The Effective Date of each Account Description and Adjustment Type for the same Schedule Number must be the same date when included on the same Balance Adjustment import.

Account Description

The chosen account must exist for the specified Schedule Number and the deal must be booked to the Standard specified in the Balance Adjustment import. Additionally, the deal must be classified before doing a Balance Adjustment import.