Asset Casualties

If an asset casualty occurs, the activation group to which it belonged must be updated. Lease Administrators can enter a casualty event for an activation group, which will retire all of the assets in the activation group. (The activation group can be split to contain only the affected units.)

After the casualty is entered, the Accountant must post the final casualty payment, and then the Lease Administrator or Accountant can trigger the lease end process and close the activation group.

Following a lease event, the Incremental Borrowing Rates (IBR) for the activation group can updated with the rates configured the in the Nakisa AdminConsole, based on the selected effective date. The default setting of the "Update IBR" checkbox depends on the lease event type, but can be overridden by users:

  • Lease Modifications: "Update IBR" is checked by default.
  • Casualty: "Update IBR" is checked by default.
  • Reassessment with "Early Buyout" or "Early Termination" Reason Code: "Update IBR" is checked by default.
  • Reassessment with "Reassessment" Reason Code: "Update IBR" is unchecked by default.

For an illustrative example of an asset casualty scenario, refer to Scenario 5: Asset Casualty.

Note: Asset casualties cannot be entered for non-lease service contracts, short term leases, or low value leases because no assets were created. Note that you also cannot enter an asset casualty if there is already a draft of the contract open.

Note that casualty events cannot be reversed because the asset has been deactivated.

To add an asset casualty event:

  1. Load the activation group.
  2. Split the activation group if required.
  3. Click Context Menu > Casualty. Enter the following information:
    • Reason Code is automatically set to "Casualty".
    • Select the Payment Date when the casualty (lease end) amount will be posted. The payment must occur in a month where no payment, accrual, or asset deprecation postings have been made, and must be on the same day of the month as the base rent payments.
    • To change the Contract Rate for the activation group, make sure that the Modify Contract Rate checkbox is selected. You must then enter the new rate in the Contract Rate field, which will be used for the liability calculations. For casualties, Modify Contract Rate is checked by default.

      Note the following:

      • Setting the Contract Rate field to 0 means that the IBR value (as of the selected Effective Date for the event) will be used instead.
      • If payments are in arrears, the contract rate cannot be changed.
      • If the activation group is using IBR values, then you can choose to update the IBR value or not when the activation group is sent to assessment.
    • Enter the Casualty Amount for each supported accounting standard that will be paid to the lessor based on your records. By default, the unpaid interest expense amount for each standard is populated in the fields. Modify the fields as required, but note that it cannot be less than the unpaid interest expense at the time of the event.

    • Enter a Description of the casualty.
  4. Click Submit, and confirm that all of the units in the activation group will be retired.
  5. A draft of the contract is created (with a yellow header and "Draft" Version).
  6. Click Terms & Conditions in the left-panel. Note that a Casualty term has been automatically added.
  7. The Lease Administrator or Accountant can click Send to Assessment when they are done reviewing the activation group.
    1. Select the Effective Date is automatically set to the Payment Date of the Casualty term and cannot be changed. From this date on, the rent payment becomes 0 for the units in the activation group.
    2. Modify the Posting Date or Document Date, if required. Note that by default, the Document Date is set to the Effective Date.
    3. If required, change the setting of Update IBR. If checked, the application selects a new IBR based on the Effective Date and the IBR rates configured in the Nakisa AdminConsole.
      • This checkbox appears if the contract is using IBR (i.e., no Contract Rate is set).
      • If the contract is classified as an ASC 840 Capital lease, the checkbox is always showsn (because even if a Contract Rate is defined, the lower of IBR and Contract Rate is used).
      • If the active contract has a Contract Rate defined but in the event it was changed to 0, then the checkbox appears and cannot be unchecked because the application must look up a new IBR.
    4. Click Submit.
  8. Review the adjustment postings that will be done once the reassessment is complete.
  9. The Business Owner or Accountant must assess the activation group, and then click Approve.
  10. The Accountant has to click Confirm Classification.
  11. Before completing the casualty event, all asset depreciation postings up to the effective date must be posted (as it will no longer be possible after the asset is retired).
  12. The Lease Administrator or Accountant has to click Context Menu > Complete Remeasurement to merge the draft version back to the master version. The Activation Group Status automatically goes to "Lease End". The unit "End Date" is automatically set to the later of the casualty effective date or the casualty payment date, and "ERP Asset Retirement Date" is automatically set to the casualty effective date.
    • If users have posted payments, accruals, or asset depreciation in the master version of the contract past the selected Effective Date, then the draft cannot be merged back to the master, and a Sync report with the errors is generated. It can be accessed from the Notification Center, or by clicking .
    • In most cases, if there is a conflict between the draft and master versions, the draft will have to be deleted and started again.
  13. In the left-panel, click Unit List. Click to review liability adjustment documents, and asset retirement documents.
  14. Post the final casualty amount, and any unposted rent and accrual amounts.
  15. Once the current date passes the date of the casualty, click Close.

    Note: The Close button will not be available until the current date passes the End Date of the unit.

  16. If the system is in standalone or hybrid mode, one of the following options are available to complete the posting process: 

    • Update the status from "Posted (Internal)" to "Posted" via transaction Excel imports and exports.
    • If an SAP Posting Bot is configured to run with the application, it will regularly transfer internal documents to SAP. The status changes from "Posted (Internal)" to "Posting (External)".
      • If the posting to SAP is successful, the status then changes to "Posted (External)".
      • If the posting to SAP fails, the status changes to "Failed (External)". The next time the posting bot runs, it will pick up the failed postings to reattempt the posting. If required, click Reverse to reverse the internally generated document (e.g., if the GL account configuration needs to be changed).

      Note: For details about documents posted by the SAP Posting Bot, copy the Document number and enter it in the following URL (where <hostname> is the Web server name of your current Nakisa Lease Administration instance):

      https://<hostname>/leasing/app/proxy/jebot/report/<document-number>/

To delete the draft version:

  1. If the draft version needs to be deleted at any point, open the draft and navigate to the contract.
  2. Click Context Menu > Delete Remeasurement, and click Yes to confirm the deletion.

See also:  

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