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Common Errors Resulting in Incorrect Lease Classification - Product Advisory

March 2019

Introduction

We have found several instances where schedules are incorrectly being stored with either no classification or a non-lease classification. The issues are un-related to the actual classification testing but nonetheless cause inaccurate classification and inaccurate accounting output. Please review any schedules with a blank or non-lease Classification to confirm the appropriate output. Please review the following specific use cases and corrective actions.

Use Case 1: Schedules Imported to Only a Transition Ledger

LeaseAccelerator is incorrectly classifying leases as either blank or Non-Lease when schedules are IMPORTED through a Portfolio Intake Workbook (PIW) and the LEDGER field contains ONLY the Transition Ledger.

The system currently requires a schedule be recorded to the source ledger (regardless of the commencement date) so that the chained transition ledger can properly inherit the classification. This is required even if the classification was overridden on the import file.

Note: Schedules imported to ONLY the source ledger are properly classified and accounted for in the chained transition ledger.

This issue is resolved in the 19R1.1 Hot Fix 1 release. You have three options to remediate data. No automated remediation is available.

  1. Delete the deal and re-import to the original source ledger. The system will automatically record the lease to the source and transition ledger with appropriate classification.

  2. Delete the deal and enter the schedule through the LeaseAccelerator application. In this case, the ledger list will show the chained ledgers and will record to both, ensuring that the classification and accounting is properly stated.

  3. After 19R1.1 Hot Fix 1 is deployed, delete the deal and re-import to the original source ledger, the transition ledger, or both ledgers.

Use Case 2: Parent Lessee Accounting Configuration

LeaseAccelerator is incorrectly classifying leases as either blank or Non-Lease when schedules are IMPORTED through a Portfolio Intake Workbook (PIW) and Asset Type and Threshold master data settings were defined at the parent lessee level.

In certain cases, the system was incorrectly requiring the Asset Type and Threshold be configured at a detail lessee level.

This issue is resolved in the 19R1.1 Hot Fix 1 release.

To remediate data, delete the affected schedules and re-import after 19R1.1 Hot Fix 1 has been deployed. No automated remediation is available.

Use Case 3: Unexpected Reclassify Effective Dates

Classification and Reclassification Effective Dates should align with actual event dates such as lease start date, ledger booking date, transition date, Renewal date, etc. If a date is entered that does not align to the event date, classification errors occur. Please review classification/reclassification dates for suspected schedules using Deal History and/or Deal Summary. If the dates do not properly align, follow these steps:

  1. Contact LeaseAccelerator Technical Support to delete the classification on the specific schedules. This MUST BE DONE THROUGH SUPPORT. Performing another Reclassification Action will not clear this error.

  2. Reclassify the schedule through the LeaseAccelerator application using a date that aligns to the proper event.

In order to prevent these issues from occurring in the future, LeaseAccelerator is working on two updates:

  • The Bulk Import workspace drop-down menu will be adjusted to default to the lease commencement date. It is currently defaulting to “today’s date”.

  • The Classification workspace will be changed so that the Reclassify Effective Date is set through a drop-down menu of referenced events rather than the user entering a specific date.

Use Case 4: Backdated Commencement and Events

As previously identified, entering a lease schedule with a commencement date prior to the effective date may cause errors in lease classification and accounting output. Review the below commentary which was previously noted Transition Use Case Product Advisory. A discussion concerning this issue was also held during an Ask the Experts session on February 28, 2019; a recording of that session is available by contacting your Customer Success Manager. 

As a reminder, deals starting before the effective date should be booked with a ledger date prior to the effective date. If the deal is recorded with a ledger date after the effective date, the system is conflicted about how to account for the deal, since it was booked into an ASC 840/IAS17 period, but from a timeframe in which ASC 842/IFRS16 applies. To resolve this issue, rebook the deal with a ledger date prior to the effective date (e.g., Dec. 31, 2018). Note: This may require unlocking December 2018.

Use Case 5: Incomplete Sweep

Certain leases may show either blank or Non-Lease due to an incomplete sweep after the 19R1 deployment. If a sweep has not occurred since that time for the suspected schedules, navigate to the Reporting screen to invoke a sweep. This will resolve the missing or inaccurate classification. Note that given the activity within customer portfolios, this case is the least common of the root causes.

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