About Financial Schedules

Once the activation group has been sent for assessment, the application generates simulations of all of the possible financial schedules (based on the contract information, different contract classification options, the terms that are likely to be exercised, and the estimated start dates). Once the activation groups are activated, the financial schedules are updated with the actual start date and new payment dates, and the simulated schedules that do not represent the confirmed classification are removed.

Financial schedules are generated per unit, and can be summarized per activation group, lease component, and contract.

The application generates the following schedules:

  • Total payment schedule: Displays the consolidation of the lease and non-lease payments, and the dates at which they are made by the lessee.
  • Liability amortization schedules: Display the lease component payments and the dates at which they are made by the lessee, as well as the balance of debt, interest expense, and other related information.
  • Non-lease payment schedules: Display the non-lease component payments (i.e., payments that do not affect the lease liability) and the dates at which they are made by the lessee.
  • Asset Transition View: Displays the asset depreciation (at the unit level) once the activation group has been activated.

For each financial schedule, there are two views available:

  • Accounting view: Shows the calendar month-end closings.
  • Treasury view: Shows the full schedule based on lease accrual periods.

By default, payments are in advance, and the payment date determines the start of the accrual period. If payments for standard terms are in arrears (which is set on the contract Accounting page), the payment date determines the last day of the accrual period.

Note: There is a view called "All Columns" that allows you to see all columns of the generated table that supports all of the financial schedule views.

In addition to the financial schedules, you can view the payment, accrual, and depreciation postings (both posted and unposted), as well as the generated SAP documents.

The interest rate used to generate the financial schedules and the initial liability are determined as follows:

  • For finance leases in the current standards (ASC 840 and IAS 17):
    • If the PVMLP is greater than the FMV, the application will calculate a contract interest rate that will make the Closing Liability Balance go to 0 at the end of the schedule.
    • If the PVMLP is less than the FMV, then the interest rate is determined as follows:
      • If the Contract Rate is not present, the Incremental Borrowing Rate is used.
      • If the Contract Rate is provided:
        • It is used for IAS 17.
        • The application uses the lower of the Contract Rate or Incremental Borrowing Rate for ASC 840.
  • For both finance and operating leases in the new standards (ASC 842, IFRS 16, and GASB 87):
    • The interest rate used to generate the schedule as well as to calculate the PV (i.e., initial liability) is determined as follows:
      • If the Contract Rate is provided, it is used.
      • Otherwise, the Incremental Borrowing Rate is used.

The financial schedules display the effective interest rates, which are calculated based on the nominal rates (entered in Contract Rate or selected from the IBR table), and the compounding frequency. For example, using the 360 Day Convention:

  • If the Nominal Annual Rate is 6.0000% and the Compounding Frequency is Monthly, then the application calculates the effective interest rates as follows:
    • Effective Annual Rate: 1 + (0.06 annual nominal rate / 12 months)) ^ 12 compounding periods - 1= 6.168%
    • Effective Monthly Rate: (1 + 0.06168 annual effective rate) ^ (1 month / 12 months) – 1 = 0.500%
  • If the Nominal Annual Rate is 6.0000% and the Compounding Frequency is Annual, then the application calculates the effective interest rates as follows:
    • Effective Annual Rate: (1 + (0.06 annual nominal rate / 1 year)) ^ 1 year - 1 = 6.000%
    • Effective Monthly Rate: (1 + 0.06 annual effective rate) ^ (1 month / 12 months) - 1 = 0.487%

The initial liability used in the schedule is determined as follows:

  • For finance leases in the old standards (ASC 840 and IAS 17):
    • The initial liability used in the schedule is the lower of the PVMLP or the FMV.
    • The PVMLP calculation uses the total GRV amount (and the liability balance will be equal to the total GRV at the end of the schedule.
  • For both finance and operating leases in the new standards (ASC 842, IFRS 16, and GASB 87):
    • The initial liability used for the schedule is the PV.
    • The PV calculation uses the expected GRV payment (and the liability balance will be 0 at the end of the schedule).

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