Initial Direct Cost Terms

The following Initial Direct Cost terms are available:

  • Initial Direct Cost (IDC): Incremental costs that are directly related to negotiating and arranging a lease (e.g., legal fees, commission, document preparation) but exclude the sales and marketing costs. These costs should be charged to the expense account in the same accounting period in which the revenue associated with the service is recognized as being earned.
  • Obligation to Refurbish: Payments that are incurred by the lessee in order to improve the general conditions of the leased asset, as part of the agreement with the lessor. Examples include costs incurred by the lessee to clean up an office space before returning it to the lessor, and costs incurred to remodel a work space. The amount entered is added to the ROU asset, and offset against a separate lease liability (and is not discounted to present value).

These costs are posted against the asset when the activation group is activated.

Note: IDC and Obligation to Refurbish terms can only be added at contract inception. These terms cannot be used when adding a lease component to an active contract.

To add an IDC term:

  1. Load the lease component, and click Terms & Conditions in the left-panel.
  2. Click Add New TermInitial Direct Cost.
  3. In the Term Type field, select "Initial Direct Cost" or "Obligation to Refurbish".
  4. By default, the selected Term Type populates the Name field. Modify it if required.
  5. The field Lease Amount/Unit is not used for IDC and Obligation to Refurbish terms.
  6. In the field Non-Lease Amount/Unit, enter the indirect costs or obligation to refurbish amount that are directly attributable to the lease contract, according to the Amount Frequency. This amount has to be maintained in the non-lease amount field, and will be distributed against the asset once the activation group is activated.
  7. The Total Amount field displays the non-lease amount entered.
  8. The Contract Currency field shows the value that was selected for the MLA or contract.
  9. The Amount Frequency field is automatically set to "One Time".
  10. The Payment Frequency field is automatically set to "One Time".
  11. The fields First Payment Date and Last Payment Date are automatically set to the start date of the base rent.
  12. The GRV/Unit field cannot be set for an IDC term.
  13. The field Term (months) is automatically set to "0".
  14. The Expected T&C Start Date and Expected T&C End Date are automatically set to the base rent start date.
  15. The Lessor Notification Date cannot be set.
  16. Click Submit.

See also:  

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