Entering an Impairment Loss

In standalone and hybrid systems, Lease Administrators and Accountants can enter an impairment loss, which will be applied to all units in the activation group.

The impairment loss is calculated as the difference between the NBV at the beginning of the period (Closing GBV - Opening AD - Cumulative Impairment Loss from the period of the event) and the recoverable value (entered by the user). The loss is distributed over the remainder of the remaining lease term.

Note: If the activation group is classified as ASC 842 operating, entering an asset impairment changes the depreciation method to straight-line depreciation.

Entering an impairment loss or gain event generates separate terms per accounting standard. If the event is not applicable to a certain classification and/or standard, the term will not be generated for it. For example, if the activation group is classified as IFRS 16 finance and ASC 842 finance, then two terms are generated. If the activation group is classified as IFRS 16 finance and IAS 17 finance, only one term is generated.

In standalone systems only, you can also perform an accelerated depreciation by entering an impairment loss event and defining the remaining number of periods used for the depreciation calculation in the field "Remaining Depreciation Life", without specifying an actual loss. Note that entering an accelerated depreciation does not affect the actual Useful Life of the asset.

Note: If you record another event after entering an accelerated depreciation, the depreciation is recalculated to the end of the lease.

Warning: If the activation group is classified as ASC 842 operating, no additional events with financial impact (such as reassessments, lease modifications, and indexation events) can be entered after the impairment, other than an impairment gain (if it is also classified under IFRS 16 or GASB 87), another impairment loss, or a casualty event.

To enter an asset impairment loss:

  1. Load the activation group.
  2. Split the activation group if required.
  3. Click Context Menu > Impairment. Enter the following information:
    • The Impairment Date is automatically set to the first day of the first month that does not have any payment, accrual, or depreciation postings. If any event (such as a reassessment, lease modification, or indexation) has been previously performed on the contract, the Impairment Date is set to the first valid date after the event.
    • Set the Reason Code to "Impairment Loss".
    • By default, the Remaining Depreciation Life is populated with the remaining useful life of the asset from the point of the "Impairment Date". Modify this field if required, but note that it cannot be greater than the remaining useful life. This field represents the remaining useful life for the purposes of asset depreciation calculations. Note that it does not affect the actual Useful Life of the asset.
    • Enter a Description of the impairment.
    • For each accounting standard:
      • The GBV field shows the closing GBV value from the previous period, and cannot be modified.
      • By default, the field NBV, beginning of period is set to the Closing GBV - Opening AD - Cumulative Impairment Loss from the period of the effective date. Modify this field if required, but note that it cannot be greater than the GBV.
      • Enter the Recoverable Amount for the asset, which cannot be lower than the difference between "NBV, beginning of period" and "NBV, end of period", and cannot be greater than "NBV, beginning of period". The impairment loss is calculated as the difference between the "NBV, end of period" and the "Recoverable Value".
      • The field NBV, end of period is automatically populated, and cannot be modified.

      Note: You can exclude a specific accounting standard from the event by setting the "Recoverable Amount" equal to the "NBV, begining of period".

  4. Click Submit, and confirm that all of the units in the activation group will be retired. A draft of the contract is created (with a yellow header and "Draft" Version).
  5. Click Terms & Conditions in the left-panel. Note that an Impairment Loss term has been automatically added for each accounting standard.
  6. The Lease Administrator or Accountant can click Send to Assessment when they are done reviewing the activation group.
    1. The Effective Date is automatically set to the same date as the Impairment Date.
    2. Modify the Posting Date or Document Date, if required. Note that by default, the Document Date is set to the Effective Date.
    3. Click Submit.
  7. Review the adjustment postings that will be done once the reassessment is complete.
  8. The Business Owner or Accountant must assess the activation group, and then click Approve.
  9. The Accountant has to click Confirm Classification.
  10. The Lease Administrator or Accountant has to click Context Menu > Complete Remeasurement to merge the draft version back to the master version.
    • 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.
  11. In the left-panel, click Unit List. Click to review liability adjustment documents, and asset retirement documents.
  12. 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 Draft, and click Yes to confirm the deletion.

See also:  

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