Deal Modifications

A deal modification records the accounting impact of a renegotiated lease contract that, in the client's professional judgment, constitutes a material change to the original agreement. When a modification is recorded, LeaseAccelerator appends the original number and adds -M00# to the schedule number of the modified deal for full modifications. For coterminous modifications the appended value is -A00#. The original deal remains active until the new deal is classified and booked.

A change may qualify as a modification when it involves a change in lease payments, lease term, assets on the lease, End-of-Term options, Residual Value Guarantee, or the economic life of a leased asset.

When to use the Modify Deal workspace

Use the Modify Deal workspace for changes that require the creation of a new modified deal. The table below shows what belongs in this workspace and what is handled elsewhere.

Before you begin: rules that apply to all modifications

The following rules and behaviors apply to every modification, regardless of type. Review these before opening the workspace.

Workspace overview

Navigation controls

• Next: validates the current step and advances to the next.
• Back: returns to the previous step (hidden on Step 1).
• Skip to summary: available on Steps 2 and 3; jumps directly to Step 4.
• Record Modification: replaces Next on Step 4; submits the modification.
• Cancel: exits the workspace without saving any changes.

Note: Your data is preserved when navigating between steps. You can move back and forth freely without losing any information you have entered.

For more details, see Modify Deal Workspace - Product Advisory.

Open the Modify Deal workspace

All modification types are launched from Deal History. The only difference between modification types is which sub-option you select in the Record Event menu.

Find your deal and open the workspace

1. In the Top Search Bar, enter the Deal # or schedule number.
2. Select the deal from the search results. Deal History opens.

In the Left Navigation Bar, navigate to Record Event:

1. In the Left Navigation Bar, hover over Record Event. The menu expands to show all event categories.
2. Hover over Record Payment or Record contract modification (whichever applies). A sub-menu appears.
3. Select the sub-option that matches your modification type. Use the reference table below.
4. The Modify Deal workspace opens at Step 1: Terms.

Navigation path reference: which path to choose

Every path below opens the same Modify Deal workspace and four-step workflow.

Note: Adding an asset at a price commensurate with its stand-alone market value is not a modification. Enter it as a new coterminous lease. See the Coterminous lease section.

Step 1: Set terms for the modified deal

Step 1 is the primary configuration step for every modification. The screen shows Existing Terms (read-only, top) and Renegotiated (Modified) Terms (editable form, below)

Review Existing Terms

The Existing Terms panel shows the current values for Advance payment, Monthly Fixed Payment Amount, Total Monthly Payments (Net of Taxes), End-of-Term Purchase Option, and Mid-Term/EOT Options. Use these as a reference while completing the Renegotiated Terms fields.

To view additional deal meta-data: including Lease Start Date, Booking Ledger Date, Payment Frequency, Duration, RCHP, and Ledger: Hover over the info icon to the right of the deal name.

Set the Date of Modification

1. In the Date of Modification field, enter the date using the month, day, and year selectors or the calendar icon.
2. Verify the date satisfies all four rules in Before you begin: Date of Modification rules.

Note: In Release 26.2, the Date of Modification field was relocated to the top of the Renegotiated Terms section. In earlier releases it appeared at the bottom of the Summary step.

Verify and adjust the number of payments

Before editing any other field, verify the # of Monthly Payments (or periodic payments) field. The system calculates this from the current system date, not the intended Date of Modification.

Important: This check is required for every modification type. An incorrect payment count produces an incorrect modified term and incorrect accounting output.

• To shorten the term: Subtract the periods you are removing. Example: 25 months remaining, shortening by 12 → enter 13.
• To extend the term: Add the new periods. Example: 25 months remaining, extending by 12 → enter 37.
• To change frequency: Recalculate for the new frequency. Example: 24 monthly payments, changing to quarterly → enter 8.
• For payment-only changes: The term does not change, but verify the count reflects payments from the Date of Modification, not from today.

Update payment fields

Update the Lease Rate Factor (LRF)

Use the Blended LRF field to drive the periodic payment amount.

1. Calculate the new LRF: LRF = New Payment Amount ÷ Total Asset Price.
2. Enter the value in the Blended LRF field and press Tab. The Periodic Payment field updates automatically.
3. Verify the Periodic Payment reflects the intended new amount.

Use the Payment Schedule Calculator for step or variable payments

Use the Payment Schedule Calculator when the renegotiated structure includes multiple payment amounts across different periods.

1. Select Payment Schedule Calculator. The calculator pop-up opens.
2. Enter the number of payments at the first amount and press Tab. A new line appears.
3. Enter the payment amount for that period. Continue adding lines for each step in the schedule.
4. Confirm the ending month on the last line matches the total remaining term.
5. Select Submit.

Change the payment frequency

1. Select the new frequency from the Periodic Payment Frequency drop-down.
2. Update # of Payments to reflect the remaining term under the new frequency.
3. Recalculate and enter the new LRF in the Blended LRF field.

Configure Mid-Term/EOT options

Important: All original EOT options are removed from the modified deal. Re-enter every option available per the contract: not only the Reasonably Certain option.

Add an EOT option

1. Select + Mid-Term/End-of-Term Options. The pop-up opens.
2. Select the option type from the drop-down: Return, Renewal, Buyout, or Mid-Term.
3. Enter the at month value. For End-of-Term options, this is typically the month after the last payment period. Example: month 37 for a 36-month deal.
4. Enter the notice period in the at least field (required, even if 0).
5. Enter the option terms: renewal payment amount, purchase price, or other relevant details.
6. If Reasonably Certain, check: "These terms constitute a clear economic incentive and are reasonably certain to be exercised."
7. Enter any relevant comments, including direct language from the lease agreement.
8. Select Add. The option appears in the table. Repeat for each additional option available per the contract.

Note: If you are not changing the Reasonably Certain option, you may reference the Existing Terms panel to see which option was originally Reasonably Certain and re-enter it with the same designation.

Handling specific modification types

Change in useful economic life

When the modification is solely to accommodate a change in the economic life of an asset, make no changes to payment or term fields.

1. Re-enter all EOT options with accurate effective months for the existing term.
2. Proceed to Step 4: Summary and submit with no term changes.
3. At the Accounting Classification Analysis workspace, select the required classification from the Override drop-down and enter a required Override Explanation describing the new economic life.

Reduce lease term with classification change

When shortening the term triggers a change in lease classification (e.g., Finance to Operating):

1. Reduce # of Payments to reflect the shortened term.
2. Re-enter all EOT options with the correct effective months for the shorter term.
3. Proceed to Step 4: Summary and submit.
4. At the Accounting Classification Analysis workspace, use the Override drop-down to force the correct classification and enter the required Override Explanation.

FMV change requiring a Unit Price update

When the modification includes a new Fair Market Value requiring an updated Unit Price:

1. Enter the new LRF using: LRF = New Payment ÷ New Total Asset Price.
2. Complete all remaining Terms fields and proceed through all four steps.
3. After saving the modification, navigate to the Details tile of the new modified deal before running classification.
4. In Schedule Details, select the edit icon next to the asset, update Unit Price to the new FMV, press Tab, then select Update.
5. Verify the payment amount on the Terms tile, then select Save.
6. Return to Deal History and select Reclassify from the Next Steps tile before proceeding to book.

Step 2: Add assets to the deal

Step 2 is optional. If you are not adding assets, select Skip to summary or Next to proceed to Step 3.

Note: Assets entered in this step are applied to the deal only after you submit the modification from the Summary page.

Set the asset available date

1. In the Assets will be available on date field, set the date the new asset(s) will be available using the month, day, and year selectors or the calendar icon.

Add an asset

1. Select + Add asset. The Add asset pop-up opens.

   Add asset pop-up shows all fields: Product Category, Select Sale/Leaseback checkbox, Product Number, Manufacturer, Description, Cost Center, GL Code, Quantity (locked at 1), Unit Price, Total Price, Unit Rent, Standalone Observable Price, Total FMV, and the Lease terms based on utilization checkbox.

2. Complete the required fields:
   • Product category: select from the drop-down.
     • Product number: enter the asset or product number.
   • Description: enter a clear description of the asset.
   • Cost Center: select from the drop-down.
   • GL Code (Coding Convention): select from the drop-down.
   • Unit price: enter the unit price and press Tab. Total price calculates automatically.
3. Complete optional fields as applicable: Manufacturer, Unit rent, Standalone observable price, Lease terms are based on utilization checkbox.
4. Select Add. The asset appears in the table.

Note: Quantity is locked at 1. To add multiple assets of the same type, add a separate line for each unit.

Review and manage the assets table

1. After adding an asset, the asset appears in the table with edit, delete, and copy-line action icons. Total Price updates at the bottom.
2. Use the row action icons to edit (pencil), delete (bin), or copy (copy icon) any asset line. Repeat the Add an asset procedure for each additional asset.
3. When done, select Next to proceed to Step 3, or Skip to summary to jump directly to Step 4.

Step 3: Remove or reduce assets

Step 3 is optional. If you are not removing or reducing assets, select Skip to summary or Next to proceed to Step 4.

Note: Removals and reductions take effect only after you submit the modification from the Summary page.

Select assets to remove or reduce

1. In Group Assets By, select how to organize the asset list (e.g., by Schedule #).
2. Select the checkbox next to each asset to remove or reduce. The Summary & cost allocation of selected assets panel on the right updates in real time.

The cost allocation panel shows:

• Selected / Active / Terminated / Disposed: asset status counts.
• Aggregate cost basis: total cost basis for the selected assets.
• Parent, Cost Center, GL Code (Coding Convention): coding details for the selected assets.

Configure the asset event

1. In the Asset Event drop-down, select:
   • Reduce Scope: retains the asset on the deal at a reduced scope (partial reduction).
   • Return @ End of Term: fully removes the asset from the modified deal.
2. Enter any Comments explaining the change.
3. If you selected Reduce Scope, enter the Percent Reduction value. This field is required and must be between 1 and 99%.
4. If needed, select Export to download the cost allocation report for the selected assets.

Select Next to proceed to Step 4: Summary.

Step 4: Review and record the modification

Step 4 is the final review screen. Review all changes carefully before submitting: corrections after submission require either canceling an unbooked modification or rolling back a completed one.

Review the Before and After Modification cards

The Summary screen displays two side-by-side cards: Before Modification (read-only, left) and After Modification (editable, right).

Both cards show: Advance payment, Monthly Fixed Payment Amount, Total Monthly Payments (Net of Taxes), End-of-Term Purchase Option, Mid-Term/EOT Options, IBR, RCHP, RC EOT Option, and EGRV.

If assets were added in Step 2, an Assets Added table appears below the cards. If assets were removed or reduced in Step 3, an Assets Removed/Reduced table appears.

Note: If validation errors or warnings exist, alert boxes appear at the top of this screen. Resolve all errors before selecting Record Modification.

Complete the After Modification fields

Review and complete the following fields in the After Modification card before submitting:

• Reasonably Certain EOT Option: Select the RC option from the drop-down. This drop-down shows only options flagged as Reasonably Certain in Step 1. If multiple RC options were added, the system defaults to the option with the latest effective month.
• Reasonably Certain Holding Period (RCHP): Enter the RCHP value. This must not exceed the total modified term.
• IBR (Incremental Borrowing Rate): Verify the IBR in the After Modification column. To apply the system default based on remaining term, country, and Lessee, select Use Default IBR.
• Estimated Guaranteed Residual Value (EGRV): If the modification includes a change to the Residual Value Guarantee, enter the updated value in the EGRV field.
• Commensurate payment adjustment: If assets were added in Step 2, select Yes or No from the "Has payment been adjusted commensurate with value of new asset(s)?" drop-down.
• Comments: Enter a description of the modification. Although optional in the system, this is strongly recommended for audit trail purposes.

Record the modification

1. Select Record Modification.
2. A dialog appears with two options. Select Confirm to proceed. A new deal will be created and the original deal will remain active until you classify and book the new, modified deal.
3. You are directed to the Accounting Classification Analysis workspace. Proceed to Classify and book the modified deal.

Important: The original deal remains active and visible in reporting until the modified deal is classified and booked. Complete classification and booking promptly to ensure accurate accounting.

Cancel an in-progress modification

You can cancel a modification that has been recorded but not yet booked. Cancellation removes the in-progress modification and restores the original deal to its previous state.

When to cancel vs. rollback

Required permissions

To cancel an unbooked modification, your access permission level must allow cancellation of in-progress modifications. The Access Levels with the privilege to cancel a modification are:

• Power User
• Enhanced User
• Data Entry User
• LA Staff

Cancel an unbooked modification

1. Navigate to the Deal Summary of the original deal (not the new modified deal).
2. Scroll to the Mid-Term/EOT Events section.
3. Locate the in-progress modification event. Select the kebab icon (three-dot menu) next to the event.
4. Select Cancel from the menu.
5. Confirm the cancellation. The in-progress modification is removed.

Note: Once a cancellation is complete, it is logged for audit purposes and displayed in Deal History. The original deal returns to its active state with its previous terms.

Classify and book the modified deal

After recording the modification, classify and then book the new modified deal. These steps apply to all modification types.

Run accounting classification

After confirming the modification, you are automatically directed to the Accounting Classification Analysis workspace. A success banner confirms: Modification saved successfully. You must classify the resulting deal before booking in order to produce accurate accounting.

1. In the Reclassify Effective drop-down, select the Modification Date.
2. Select Refresh Classification. The system runs classification tests across all applicable accounting standards.
3. Review the Summary of Tests table. Expand Analysis by Category and Deal Characteristics for additional detail.

Save accounting classification

1. Select Save Account Classification. A success banner confirms: "Accounting Classification Analysis generated and saved."

Book the modified deal

1. Navigate to Deal History via the Left Navigation Bar.
2. On the Next Steps tile, select Book. The Book Deal workspace opens.
3. In the Ledger Date drop-down, verify the correct date. Available dates are based on the Date of Modification and open accounting periods.
4. Verify the Ledgers. The system pre-populates the same ledgers as the original deal.

Important: The modified deal must be booked to the same ledgers as the original deal. Booking to a different ledger breaks the accounting linkage and is not permitted: the lease must instead be entered as a brand-new lease.

5. Verify or select the correct Expected Disposition (RC option). If you were unable to select the correct RC option in the Modify Deal workspace, you may do so here.
6. Verify the Expected Holding Period and update if needed.
7. Verify the IBR. Select Use Default IBR to apply the system default based on remaining term, country, and Lessee.
8. Select Book.
9. You are directed to Deal Summary. Once booking is complete, select Deal Summary in the Left Navigation Bar again to refresh the page. The modified deal's ledgers and all relevant information are now visible.

Scenario quick reference

For a complete mapping of all modification scenarios to their corresponding steps, see the Deal Modifications: Scenario Quick Reference.

Other workflows

Coterminous lease: adding an asset at stand-alone price

When an additional asset is added at a stand-alone price commensurate with the marketplace and the term is not changed, the correct approach is to create a new coterminous lease: not to use the Modify Deal workspace.

Important: Using the Modify Deal workspace to add an asset at stand-alone price creates a full -M00# modified deal, not a coterminous -A00# deal. This terminates the original deal, which is not the intended outcome. Always follow this section's process for stand-alone-price asset additions.

What is a coterminous lease?

A coterminous lease terminates on the same date as an existing related lease. It has a different Lease Start Date but shares the same Original Lease End Date and the same payment due dates from its own start date. Both leases must share the same Lessee.

Step 1: Prepare: gather information from the original deal

1. Open the original deal and note all participant details: BU, Entity, Lessee, Geography, Ship To, Vendor, Funder, Treasury Approver, Reporting Area, and any deal-level custom participants.
2. Note the Original Lease End Date and all End-of-Term options. The coterminous lease is assumed to carry the same options.
3. Calculate the remaining term: using the Original Lease End Date, determine the number of payments remaining from the date the new assets are being added. The first day of that period becomes the Lease Start Date of the coterminous deal.
4. Verify your calculation: the new lease must end on the same date as the original lease.

Step 2: Create the new lease

1. Navigate to the Enter Schedule workspace from the Left Navigation Bar.
2. Enter the new asset(s) as a new lease, using the participant information from the original lease.
3. On the Details tile, enter a Schedule Number that partially matches the original. This enables wildcard searches in reports. Example: if the original is "Acme 123", use "Acme 123B".
4. Enter the asset information including Description and Unit Price.
5. On the Terms tile, enter the Payment Frequency and Number of Payments based on the calculated remaining term. The frequency and repayment mode must match the original lease.
6. Enter all End-of-Term options, adjusting the at month to align with the duration of the new coterminous lease.
7. Enter any Expenses related to the new asset(s).
8. Select Save.

Step 3: Book the coterminous lease

1. In Deal History on the Next Steps tile, select Book.
2. In the Book Deal workspace, enter the Commencement Date for the new asset(s) and select the appropriate Ledger Date.
3. Book to the same ledger(s) as the original lease.
4. Verify Expected Disposition and Holding Period, then select Book.
5. Once booking is complete, scroll to the bottom of Deal Summary and select Generate Accounting Classification.
6. In the Accounting Classification Analysis workspace, select the Commencement Date from the Refresh Classification drop-down, then select Refresh Classification.
7. Verify Analysis by Category and Deal Characteristics, then select Save Classification.
8. Return to Deal Summary and confirm on the Summary tile that the Original Lease End Date of the new deal matches that of the original deal.

Step 4: Establish the coterminous relationship

1. On the new deal, go to the Related Deals tile.
2. In the This deal drop-down, select "has a coterminous relationship with".
3. Set the Effective Date to the Lease Start Date of the coterminous deal.
4. Select Find Eligible Deals.
5. In the pop-up, enter only the wildcard (*) in the Schedule Number field.

6. Verify the Effective Date is accurate, then select Retrieve Eligible Deals.
7. Find the original deal in the list and select Use next to its schedule number.
8. Back on the Related Deals tile, confirm the original schedule number appears next to the drop-down.
9. Select Create Deal Relationship. The coterminous relationship is established and both deals are linked.

Note: If a new asset is added with a different term and its price is commensurate with the marketplace, enter it as a new lease and manually add a non-coterminous relationship via the Related Deals interface.

Asset events: non-modification workflows

The following scenarios do not require a deal modification. They are recorded using the Record Asset Event workspace, accessed via Record Event in the Left Navigation Bar.

Record a partial termination (contractual asset return)

Use this when one or more assets are being returned from an active lease. A remeasurement occurs using the then-current IBR if the surviving payment differs from the system-calculated amount.

Note: If the return is expected to trigger a reclassification of the remaining deal, use the Modify Deal workspace instead. See When to use the Modify Deal workspace in the Overview.

1. Open the deal. In the Left Navigation Bar, hover over Record Event → Exercise lease termination → select Record contractual return.
2. Select the asset(s) to terminate. Multiple assets with the same return date can be selected simultaneously.
3. Review the system-calculated surviving payment. Edit if the actual surviving payment differs.
4. Confirm Return Option is pre-selected in the Asset Event drop-down.
5. Set Ledger Date to the appropriate fiscal month/year.
6. Set Return Date to the appropriate date. Best practice is the last day of a payment period.
7. Enter any relevant Comments, then select Save.

Record a renewal or extension

Use this when a renewal option is ready to be exercised. If the renewal is not yet ready to be exercised but the RCHP must change, use the Modify Deal workspace instead.

1. Open the deal. In the Left Navigation Bar, hover over Record Event → Exercise lease renewal/extension → Record contractual renewal → select the appropriate renewal option.
2. Select the assets to renew.
3. Confirm the renewal option is pre-selected in the Asset Event drop-down.
4. Set Ledger Date to the appropriate fiscal month/year.
5. Set First day of Renewal Date to the day after the last day of the original term.
6. Enter the renewal payment amount.
7. Enter any relevant comments, then select Save.

Record a full asset impairment

Use this when the lessee is vacating a leased space or asset but continuing to make payments. Full impairment records the reduction in right-of-use asset value without creating a modified deal.

1. Open the deal. In the Left Navigation Bar, hover over Record Event → Impair an asset. The Record Asset Event workspace opens.
2. Select a single asset.
3. Confirm Impairment is pre-selected in the Asset Event drop-down.
4. Set Ledger Date to the appropriate fiscal month/year.
5. Set Impairment Date. Best practice is the last day of the fiscal month before impairment takes effect, or the first day of the fiscal month in which you want impairment to take effect.
6. Enter any relevant comments.
7. Enter the Impairment Amount. This must be less than or equal to the net book value of the lease schedule. The maximum allowable amount is shown in red next to the field.
8. Select Save.