About Contract Inception

Lease Administrators can create contracts under a master agreement (MLA) once the MLA has been approved (and is in the Active Master Agreement Status).

A full contract is composed of the following objects:

  • Contract: The actual agreement that reflects the financial conditions and terms of the lease.
    • Lease Components: Contains the same terms and conditions, and asset characteristics. A contract can have multiple lease components to allow the grouping of assets that may have different asset classes (e.g., one for trucks, and another for forklifts), but belong to the same agreement. They may have different pricing and payment terms, but a common contract interest rate because they belong to the same contract.
      • Activation Group: Group of units where the same terms and conditions are likely to be exercised, and the same activation date. The activation group can be split into multiple groups to have different terms likely to be exercised, different classifications, and different activation dates.
        • Units: Individual units, for which assets will be created either in SAP, or internally (if disconnected from SAP).

To set up a full contract:

  1. The Lease Administrator has to create a contract and fill in all required information.
  2. The Lease Administrator or Accountant has to create the required lease components in the contract, and define the terms and conditions.
  3. The VP of Leasing has to approve the contract, which will automatically generate the activation groups and units under the lease components.
  4. The Lease Administrator or Accountant has to maintain each activation group (including determining which terms and conditions are likely to be exercised).
  5. The Business Owner or Accountant has to assess the activation group, and approve it.
  6. The Accountant has to confirm the classification of the activation group.
  7. The Lease Administrator or Accountant has to activate the activation group.

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