Prepaid Terms

Any lease payments made to the lessor before or at the start of the lease should be entered as prepayment. Prepaid amounts are added to the right-of-use asset during initial recognition without impacting the lease liability, and therefore should not be entered as base rent (minimum lease payment) in the application.

Prepayment also includes non-refundable deposits, which is an amount the lessee pays the lessor to secure the terms of the contract for both parties, if the non-refundable deposit payment has been made to the lessor before or at the start of the lease. Non-refundable deposits are part of the consideration in the contract. Please note, prepayment excludes refundable deposit. Because the payment is refundable, it would not meet the definition of a lease payment.

To add a prepaid rent term:

  1. Load the lease component, and click Terms & Conditions in the left-panel.
  2. Click Add New Term > Prepaid.
  3. In the Term Type field, select "Prepaid".
  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 prepaid terms.

    Note: If the contract is a non-lease service contract (set in the Lease Type field), lease amounts cannot be entered.

  6. In the field Non-Lease Amount/Unit, enter the amount that will reduce the asset value. The amount is posted against the asset once the activation group is activated.
  7. The Total Amount field displays the sum of the lease and non-lease amounts entered.
  8. The Contract Currency field shows the value that was selected for the MLA or contract.
  9. The Amount Frequency field indicates how frequently the total amount is applied, and it is automatically set to "One Time".
  10. The Payment Frequency field indicates how frequently payments will be made, and is automatically set to "One Time".
  11. The field First Payment Date and Last Payment Date are automatically set to the start date of the base rent term.
  12. The GRV/Unit field cannot be set for a prepaid rent term.
  13. The fields Term (months) and Term (days) are automatically set to 0 to indicate a one time reduction.
  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 for a prepaid rent term.
  16. Click Submit.

See also:  

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