Contract Accounting Information

Lease Administrators or Accountants have to enter accounting information for the contract.

To modify accrual terms for each activation group:

  1. Load the contract and click Accounting in the left-panel.
  2. The following information can be defined in the Financing Terms section.
    • Enter the nominal interest rate in the Contract Rate if it is known. This rate can be given by the lessor to the lessee. If this value is provided, it will be used in present value of minimum lease payments (PVMLP) in most cases. See Classifying an Activation Group for more information.

      Note: This field cannot be set if the contract is a non-lease service contract, short term lease, or low value lease (set in the Lease Type field).

    • If required, set the Consumer Price Index (CPI) in the CPI field, which determines the type of indexation used. The values are defined in the Nakisa AdminConsole. This field will be used for future indexation events. If CPI is set to:
      • "None": The contract does not use CPI indexation rates.
      • "CPI Local": The indexation values (CPI) will be defined manually by the user.
        • The field Current Index Level is set to 100.000 by default. If required, modify the value to indicate if the current index level is some other amount, but note that it will not affect the current financial schedule. It will be used to calculate the difference with the new rate when an indexation event is added.
      • "CPI Global": The Current Index Level is set according to configured indexation dates.
        • The field Reference Date becomes enabled. Select the date that the application will use to filter the Indexation drop-down. Only the configured indexations that are valid for the Reference Date will be shown.
        • The field Indexation becomes enabled. Select a configured indexation.
        • The field Current Index Level is set to the value configured (based on the current date) for the selected indexation.

      Note: Following an indexation event, the new indexation level will be stored in the field Current Index Level, and the new Reference Date will be displayed.

    • Select the Embedded Derivative checkbox, if required. This field is only for informational purposes.
    • The Compounding Frequency represents the number of times in one year where interest expense will be calculated (e.g., setting this field to 1 represents annual compounding, and setting this field to 12 represents monthly compounding). Note that the Compounding Frequency is typically the same as the Payment Frequency in the terms and conditions.
    • Select the 360 Convention checkbox if required. (This convention assumes a year contains 30 days in a month and 360 days a year.) Otherwise, the interest value per month is based on the actual number of days for each month.
    • Select Payments in Arrears if the terms and conditions in the contract are in arrears. This implies that the payment is done at the end of the day, and not at the beginning.
  3. The Default Cost Objects section allows you to set default values for the activation groups, that may then be overridden.
    • The Company Code was either set in the MLA, or when the contract was first created. It cannot be modified.
    • Select either the default Cost Center or WBS. These fields can only be set at contract inception. If the cost object must be changed after the contract is active, it must be done per unit.
      • The Cost Center is an organizational unit within a controlling area that represents a defined location where cost is incurred.

      • The WBS (Work Breakdown Structure) field represents a model of the project that organises project tasks into a hierarchy. It can also be a cost collector for the corporation.
    • For systems in standalone mode with Cost Center Allocation Rules enabled in the Nakisa AdminConsole, if you are using Cost Centers you can select the Allocate Cost Center checkbox to split amounts going to P&L accounts across multiple Cost Centers. If selected, define the rules in the Cost Center Allocation Rule section that appears on the page:
      1. Click Add Rule.
      2. Select a Cost Center from the drop-down, and enter the Allocation Percentage for that Cost Center.
      3. Click Submit.
      4. Repeat the previous steps until the Allocation Percentage for all the rules add up to 100%.

      Alternatively, rules can be imported via Excel at the contract level or at application level if Excel imports and exports have been enabled in the Nakisa AdminConsole.

      Note: If this feature is required but does not appear, contact your system administrator to enable it. This feature is only applicable to systems in standalone mode. When the system is connected to SAP, Cost Center allocation rules can be defined directly in SAP.

    • The following optional fields can be set if required. These fields can only be set at contract inception. If the cost object must be changed after the contract is active, it must be done per unit.
      • The Functional Area is used to analyze Cost of Sales Accounting. It allows you to analyze your organization’s expenses by functional area (such as Finance, Marketing, Production, and HR).
      • The Liability Business Area is used to differentiate transactions that come from different lines of business in a company.
    • To use internal orders in SAP, select the Track Costs checkbox and select the Internal Order Type.
      • To generate internal orders in SAP, leave the Internal Order field empty. It will then display the internal order value once it has been created in SAP.
      • To use an existing internal order from SAP, select the required one in the Internal Order drop-down. The list shows the internal orders that are attached to the selected company code, as well as the ones that are not attached to any company code.

      Note: If the application is operating in standalone mode, it can still create internal orders, which will be stored in the application database. These internal orders can then be manually mapped to internal orders in the non-SAP ERP system, if required.

  4. The Payable section contains the following information:
    • Vendor: This field is set to the Lessor from the Partner page.
    • The Contract Currency is populated from the contract Definition page, and cannot be modified.
    • The Generate Vendor Invoices field determines how the payables areas are posted. Select this field to generate a rent document (i.e., interim invoice) against a vendor (Accounts Payable). The payment is only posted for the main accounting standard with one clearing document per ledger. Unselect this field to post to a Clearing account. Note that this field is set or cleared by default based on the configuration of the company code.

      If this field is selected, the following fields can also be set:

      • Payment Terms: Defines the payment terms (e.g., pay 60 days after receiving the invoice) defined for the contract. It can be different from the terms of payment of the Lessor (vendor).
      • The following fields can be set, if required. This information will be pushed down to the tax fields at the unit level, where you can define separate tax codes and jurisdictions per unit. Note that in standalone systems, these fields are only used for informational or reporting purposes.
        • The Tax Code field specifies the SAP tax code that is assigned to the posting transaction. It represents the rate of the city/region/province where the goods are used.
        • The Tax Jurisdiction field specifies the SAP tax jurisdiction that is assigned to the posting transaction. It represents a geographical area in countries where taxes are levied at more than one level.
  5. The Accounting Standards section displays the main and alternate accounting standards for the selected Company Code.

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