Portfolio Management Error Corrections

Many things can happen during the life of a lease, and it is important to stay on top of your portfolio within LeaseAccelerator to ensure the completeness and correctness of your accounting. Portfolio Management covers changes and updates to various attributes of leases and assets but also life cycle events that may occur, like renewals or payment adjustments. Some of these changes and events are changes in estimates internal to the Lessee and do not result in a renegotiation of the lease agreement and therefore do not require a deal modification within LeaseAccelerator. However, some changes do constitute a renegotiation and therefore the best practice and sometimes only way to account for them, is by modifying the original lease.

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Portfolio Management That Doesn’t Require a Deal Modification*

Many events and changes may occur during the life of a lease that are expected and do not require a deal modification, as the original contract is not being renegotiated.

*There are some exceptions (described below) where modification functionality may be utilized for changes in estimates, to achieve the desired accounting result.

Asset Moves Location

Scenario: An asset has moved in location and now needs to be allocated to a different Cost Center and the ShipTo location needs to be updated.

Step	Action: Asset Management Changes
1	Search for the deal using the Top Search Bar and Deal #.
2	Once you are in the specified deal, from the Left NavBar, click Asset Management.
3	Once in the Asset Management workspace, on the Details tile, select the single asset for which you wish to change an asset attribute.
4	Scroll down to where you see Change Information for Selected Assets, Effective and a date field. Be sure to populate the date to whenever you want these changes to take place. Also please note that Asset Management respects closed periods, therefore you will receive a warning if you select a date in a closed period. You will need to use the date of the first day of the first open period instead. Note: Backdated changes to any Asset Level or Allocation Level attribute on this screen that pre-date a previously recorded change to the same Participant will overwrite those values.
5	Open up the Asset Attributes section.
6	Find the ShipTo field and update with current location.
7	Click Save in the Asset Attributes section.
8	Select the same asset for which you wish to change an allocation attribute.
9	Scroll down to where you see Change Information for Selected Assets, Effective and a date field. Populate with the date when the Cost Center change is effective.
10	Open up the Allocation Attributes section.
7	Click the Edit icon next to the line item that needs correcting.
8	Update the Cost Center.
9	Click Update.
10	Once all changes have been made, click Save within the Allocation Attribute section.

Exercising Existing EOT Option

Scenario: Exercising an option that was in the original lease.

Step	Action: Exercising an Option
1	Search for the deal using the Top Search Bar and Deal #.
2	Hover over Record Event in the Left NavBar. Then hover over either Record a termination or Record an extension/renewal. Then hover over the appropriate selection for recording a contractual renewal, buyout or return. Finally, select the appropriate option and you will be taken to the Record Asset Event workspace.
3	Select the assets that you want to renew, return or buyout.
4	The appropriate option from the Asset Event drop-down will pre-populate based on the Event you selected in the Record Event cascading menu.
5	Change Return Date, Buyout Date or First Day of Renewal Date to appropriate date, depending on the event you are recording.
6	Change Ledger Date to appropriate fiscal month/year. This drop-down will be driven by the Effective Date of the event and open periods.
7	Verify that any resulting payment amounts, if applicable, are correct. Also verify renewal terms as necessary.
8	Enter any relevant comments related to the option.
9	Click Save.

Reclassifying After Renewal

Scenario: Lease is renewed and qualifies as Finance lease rather than Capitalized-Operating after renewal.

Step	Action: Reclassify Deal using Renewal as Effective Date
1	Search for the deal using the Top Search Bar and Deal #.
2	Click Deal Summary on Left NavBar.
3	Go to the Details tile.
4	Click the Reclassify button.
5	Select Renewal Date from the Reclassify Effective Drop-down.
6	Click Refresh Classification.
7	Click Save Accounting Classification.
8	If you chose Reclassify Effective Date in a closed period, you will receive a pop-up telling you that the Reclassification will be effective as of the first day of the first open period. What this means is that the true-up journal entries will occur on the first day of the first open period, though they will reflect changes starting renewal effective date. Click Ok.

Payment Change Due to Resolution of Contingency

Scenario: Payments for a lease have changed due to a resolution of a contingency in the lease agreement.

If you have language in your lease agreement that account for changes in payments due to various contingencies, then a deal modification is not required. Instead, you would record a Payment Adjustment.

The reason code used determines if that lease will be remeasured or not when you make that adjustment. If you are expecting a remeasurement for ASC 842, the only time that will happen is when you have a recurring contingency resolved. All other types will not remeasure. For IFRS 16, remeasurement will occur when you have recurring payment adjustments for either a contingency resolved or a change in the underlying index.

Step	Action: Recording a Payment Adjustment
1	Search for the deal using the Top Search Bar and Deal #.
2	Hover over the Record Event menu in the Left NavBar.
3	Hover over Record a payment, then Change a payment.
4	Now hover either Record one-time payment change or Record recurring payment change.
5	Now select the appropriate reason for your adjustment and you will be taken to the Record Payment Adjustment workspace.
6	Within this workspace, some fields will pre-populate based on the selection you made in the Record Event cascading menu.
7	For Change Payment starting on, change the date from the current date to a valid payment date. You may refer to the payment schedule shown in the workspace to verify that you have indicated a valid payment date.
8	If you have indicated a valid payment date, the Scheduled Payment Amount will appear. If this is blank, check your date as it is not a valid payment date.
9	Next enter the new payment amount. Please note that this is not the change in payment but rather the entire new payment amount.
10	If you selected a recurring payment adjustment, you will see the Remeasurement Date where you can select the appropriate fiscal period.
11	Depending on your reason for the adjustment, you will have different fields that you must populate. Red means those fields are required, so please ensure that you are populating those.
12	When all appropriate fields have been populated, click the Save Payment Adjustment button.
13	The lease will be rebooked, and you will need to reload Deal Summary once the booking is complete to see the changed payment in the payment schedule.

Change or Addition of General Ledger Account

Scenario: One of the general ledger account numbers has changed or a new set of accounts will be used.

System is designed that ledger configuration changes are outside of the MEC control mechanism. If you need to change account numbers without making those changes retrospective, you will need to create a new coding convention.

When one of the account numbers used in the ledgers changes, this requires a configuration update. If you have a new set of accounts, then you must create a new GL Code (coding convention) first and then change the GL Code for existing assets. See steps below for steps on how to change/add coding conventions in your ledgers and then how to change the GL Code for specific assets.

Step	Action: Updating your Ledgers and Coding Conventions
1	You must be a Power User or System Admin User to update the Ledgers.
2	From the Left NavBar, select Configuration Settings under Accounting Administration.
3	Click on the Ledger Numbers tile.
4	Click the Edit icon next to the set of books that you would like to update.
5	In the first pop-up, click the Edit button.
6	In the next pop-up, if you are changing or updating an existing account number, look for the GL Code (coding convention) that you want to update and click the Edit icon to the left of it.
7	This will pull up the final pop-up for that specific coding convention where all the accounts are listed. Change the appropriate account field(s) as necessary.
8	Click the Save button on this pop-up.
9	Click the Save button on the second pop-up.
10	Finally, click the Save button on the main Ledger Number workspace, below the list of Ledgers.
11	If you are adding a new coding convention, follow steps 1-5.
12	Click the plus sign under the existing coding conventions to add a new one.
13	Name the coding convention. Remember, this will be your GL Code and what you will put in that field when you enter a lease through the UI, populate a PIW, or make updates in Asset Management. Do not use any special characters.
14	Populate all relevant account fields, remembering the required ones. Best practice is to populate each account field with something, even if you don’t currently have an account number.
15	Click the Add button to save and close this pop-up.
16	Click the Save button on the second pop-up.
17	Finally, click the Save button on the main Ledger Number workspace, below the list of Ledgers.

Updating the GL Code for Asset(s)

Step	Action: Asset Management Changes
1	Search for the deal using the Top Search Bar and Deal #.
2	Once you are in the specified deal, from the Left NavBar, click Asset Management.
3	Once you are in the Asset Management workspace, on the Details tile, select the single asset for which you wish to change an allocation attribute.
4	Scroll down to where you see Change Information for Selected Assets, Effective and a date field. Be sure to populate the date to whenever you want these changes to take place. Also please note that Asset Management respects closed periods, therefore you will receive a warning if you select a date in a closed period. You will need to use the date of the first day of the first open period instead. Note: Backdated changes to any Asset Level or Allocation Level attribute on this screen that pre-date a previously recorded change to the same Participant will overwrite those values.
5	Scroll down further and open up the Asset Allocation section.
6	Click the Edit icon next to the line item that needs correcting.
7	Update GL Code.
8	Click Update.
9	Once all changes have been made, click Save button within the Allocation Attribute section.

Changing EOT Option to Reasonably Certain

Scenario: Changing a renewal option that was not originally Reasonably Certain to be exercised to be Reasonably Certain.

If the renewal is ready to be exercised, you can simply record the asset event and exercise that renewal as that will drive a remeasurement. If the renewal is not ready to be exercised but your Reasonably Certain Holding Period (RCHP) is changing, you must Modify the deal.

Renewal is ready to be exercised

Step	Action: Exercising a Renewal Option
1	Search for the deal using the Top Search Bar and Deal #.
2	Hover over Record Event in the Left NavBar. Then hover over Record an extension/renewal. Then hover over Record a contractual renewal. Finally, select the appropriate renewal option and you will be taken to the Record Asset Event workspace.
3	Select the assets that you want to renew.
4	The Renewal Option from the Asset Event drop-down will be pre-selected.
5	Change First Day of Renewal Date to appropriate date. This should be the first day after the original term.
6	Change Ledger Date to appropriate fiscal month/year. This should be the date you want the deal to be remeasured. Best practice is to remeasure on the first day of a fiscal period. If the renewal is backdated, the first open fiscal period should be used; for all other renewals, the current fiscal period should be used.
7	Enter any relevant comments related to the renewal and verify all payment and term information is accurate.
8	Click Save.

Early Termination

Scenario: Decision was made to exit a building before lease expiration.

In this scenario you would be exercising the return or early return option. If the return is ready to be exercised in the current or a future fiscal month, record the asset event as that will drive a remeasurement. If the return is not ready to be exercised but the RCHP is changing, modify the deal. If you exit the building but expect to continue making payments, fully impair the asset. If you exit part of the building, you can partially impair the asset. If you impair an asset, no deal modification is necessary.

Return is ready to be exercised

Step	Action: Exercising a Return Option
1	Search for the deal using the Top Search Bar and Deal #.
2	Hover over Record Event in the Left NavBar. Then hover over Record a termination. Then hover over Record a contractual return. Finally, select the appropriate return option and you will be taken to the Record Asset Event workspace.
3	Select the assets that you want to return.
4	The Return Option from the Asset Event drop-down will be pre-selected.
5	Change Return Date to appropriate date. This should be the day that you exit the building.
6	Change Ledger Date to appropriate fiscal month/year. This should be the date you want the deal to be remeasured. Best practice is to remeasure on the first day of a fiscal period. If the return is backdated, the first open fiscal period should be used; for all other returns, the current fiscal period should be used.
7	Enter any relevant comments related to the return.
8	Click Save.

Fully or Partially Impair Asset

Step	Action: Record an Impairment
1	Search for the deal using the Top Search Bar and Deal #.
2	Hover over Record Event in the Left NavBar. Then hover over Impair an asset. You will be taken to the Record Asset Event workspace.
3	Select the asset that you want to impair. You may only impair one asset at a time.
4	Impairment will be pre-selected from the Asset Event drop-down.
5	Change Impairment Date to appropriate date. This should be the day that you exit the building.
6	Change Ledger Date to appropriate fiscal month/year. This should be the date you want the deal to be remeasured. Best practice is to impair on the first day of a fiscal period. If the impairment is backdated, the first open fiscal period should be used; for all other impairments, the current fiscal period should be used.
7	Enter any relevant comments related to the impairment.
8	Specify the impairment amount.
9	Click Save.

Note: The impairment is limited to the highest NBV of the ROU asset of the set of ledgers into which the deal is booked.

Removing an Asset

Scenario: Original lease includes 10 equal value trucks with a monthly payment of $10,000. One of the trucks constantly knocks and pings and despite all efforts to service it, the Lessee and the Lessor finally agree that the Lessee can return the truck early.

The steps to take to make this update in LeaseAccelerator depend on what the Lessee expects the resulting accounting impact to be. The Lessee may wish to simply record a partial termination, but it is important to note that, generally speaking, if you are doing a partial termination and if the surviving payment is materially commensurate, a modification is not necessary. Recording a partial termination where the payment is exactly commensurate, no remeasurement will occur. However, if the payment is different than the system calculated payment, a remeasurement will be performed using the then current IBR applicable for the remaining term of the surviving assets, but no reclassification will be done. Should a Lessee expect to reclassify the deal, then the deal must be modified.

Recording a partial termination

Step	Action: Recording a partial asset event
1	Search for the deal using the Top Search Bar and Deal #.
2	From the Left NavBar, hover over Record Event. Hover over Exercise lease termination and then Record contractual return. This will take you to the Record Asset Event workspace.
3	Select the asset that you want to terminate (return). Please note: if you have multiple assets being terminated, you may select them at the same time if the Effective date of those returns is the same.
4	The system will calculate the surviving payment based on the remaining assets, but this field is editable, so you may change as necessary.
5	The Return Option from the Asset Event drop-down will be pre-selected.
6	Change Return Date to appropriate date. This should be the day that the asset is returned, and best practice is to put the last day of a payment period.
7	Change Ledger Date to appropriate fiscal period. This drop-down is driven by the Return Date and open periods.
8	Enter any relevant comments related to the return.
9	Click Save.

Extending Term/Decreasing Payment

Scenario: Lessee extends a lease for an additional 12 months and decreases the payment.

In this scenario, you should evaluate the specifics of the situation. This could simply be a renewal to extend the term and decrease the renewal payment. If the renewal was not Reasonably Certain, the deal will be remeasured when you record the renewal. If the renewal was Reasonably Certain but you are changing the payment amount originally indicated, the system will also automatically remeasure the deal due to the change in estimate of the payment. A deal modification is only required if, in your professional judgment, this change constitutes a true material renegotiation of the lease or if it occurs mid-term.

Recording a renewal

Step	Action: Recording a partial asset event
1	Search for the deal using the Top Search Bar and Deal #.
2	From the Left NavBar, hover over Record Event. Hover over Exercise lease renewal/extension and then Record contractual renewal and then select the appropriate renewal option. This will take you to the Record Asset Event workspace.
3	Select the asset that you want to renew.
4	The Renewal Option from the Asset Event drop-down will be pre-selected.
5	Change First Day of Renewal Date to appropriate date. This should be the day after the last day of the original term.
6	Change Ledger Date to appropriate fiscal period. This drop-down is driven by the Renewal Date and open periods.
7	Enter the decreased renewal payment amount.
8	Enter any relevant comments related to the renewal.
9	Click Save.

Change Functional Currency

Scenario: Decision was made to change the functional currency assigned to a lease.

In LeaseAccelerator, the functional currency attribute is associated with a deal level participant, such as Entity or Lessee. As such, to change the functional currency of a lease, you would need to change the participant associated with the lease that bears the functional currency attribute. The change should be carried out as follows: In this scenario you would be changing the functional currency of a lease. If the functional change needs to be prospective, or from a point in time forward, then the existing lease needs to be returned and a new lease entered for the period when the new functional currency needs to apply. If the change to functional currency is retrospective, from lease inception, then the lease needs to be rolled back and re-imported applying the participant with the correct functional currency.

Change in Functional Currency is prospective

Step	Action: Exercising a Return Option, and entering a new lease, perform Balance Adjustment
1	Search for the deal using the Top Search Bar and Deal #.
2	Hover over Record Event in the Left NavBar. Then hover over Record a termination. Then hover over Record a contractual return. Finally, select the appropriate return option and you will be taken to the Record Asset Event workspace.
3	Select the asset(s) that you want to return. In this case you should select all assets on the lease.
4	The Return Option from the Asset Event drop-down will be pre-selected.
5	Change Return Date to appropriate payment period end date.
6	Change Ledger Date to appropriate fiscal month/year. If the return is backdated, the first open fiscal period should be used; for all other returns, the current fiscal period should be used.
7	Enter any relevant comments related to the return.
8	Click Save.
9	Enter or import a new lease with a Lease Start Date equal to the date the new functional currency should be effective. Ensure new lease is fully booked and classified.
10	Import a Balance Adjustment to true up the Net Book Value of the new asset for the original lease balance.

Change in Functional Currency from the Lease Start Date

Step	Action: Renumber schedule, rollback deal, then re-enter
1	Search for the deal using the Top Search Bar and Deal #.
2	In the Deal History workspace, go to the Documents tile.
3	Click the kebab (three dots) to the right of the Lease Schedule in the list of documents and select Renumber/Redate.
4	In the Change Document Fundamentals workspace, change the Schedule Number (Recommend adding ROLLBACK to existing Schedule Number for consistency and to identify rolled back deals easily). Note: Remember that special characters including the underscore (_) are not allowed.
5	Input any necessary comments.
6	Click Save and verify that all Schedule Numbers have changed.
7	Next, while still in the Deal History workspace, go to the History tile.
8	Select Rollback booked deal from the Event to Record drop-down.
9	Enter appropriate date if necessary. This will auto-populate to the current date, but best practice is to enter the first day of the first open period, which may not be the current date.
10	Add any comments relevant to the event that will appear in the Deal History audit trail.
11	Click Save.
12	If the functional currency of the Lessee or Entity is changing, enter a new participant with the new functional currency. Open the Contact Management flyout from the Left NavBar. Click the plus sign next to Company. In the new company record pop-up, enter relevant information including the appropriate Lessee role that is tied to functional currency. Select the new Functional Currency from the drop-down. Click Save.
13	Re-enter or re-import the lease using the original Schedule Number with the Lessee or Entity that has the correct functional currency. Ensure that the new lease is fully booked and classified.