Lease Component Terms and Conditions

Users must define terms and conditions for the lease components by entering information at inception, when the Lease Component Status is "Define".

Users have the option of using the basic or advanced version of the Terms and Conditions form, depending on how complex the term is:

The form opens in basic mode, and provides a simplified view with only the essential fields needed to define a standard, straightforward term.
Advanced Mode displays all available fields, giving users full control over complex term setups. Note that this mode is not available for Initial Direct Cost terms.

Once the terms and conditions are created, users can edit them , or make a copy .

To add lease component terms and conditions using the basic form:

Open the lease component.
At the top of the contract, navigate to the Terms & Conditions page.
Click and select "Lease" or "Non-Lease" to determine whether the term amount is a lease or non-lease amount. In the New Terms and Conditions window, note that some options may not be available (based on the selected term type).
In the General Information section, enter the required information. Note the following:
- Type: For lease amounts, select whether you are entering a payment term or initial direct cost.
- Non-Lease Category: For non-lease amount, select the valid expense category.
- Name: For lease amounts, select the correct term and condition name:
  - Base Rent
    Note: To add Prepaid rent, add a Base Rent term with both the First Payment Date and the Payment Term End Date set to be before the ROU Start Date.
  - Free Rent / Reduction: The amount (entered as a negative value) reduces the base rent or extension amount, but cannot result in an overall negative value. Note that you can use this term for cash incentives received after the ROU Start Date.
  - Extension
  - Purchase Option: This term is only available for lease components under lessee contracts.
  - Termination Option
  - Expected GRV: This term is only available if a Guaranteed Residual Value was entered on the Definition page, and if the lease component belongs to a lessee contract.
  - Cash Incentive: The amount (entered as a negative value) is the paid and received amount that reduces the asset, with no impact on the liability. Note that this term can only be added at inception, and that it is not available for short term, low value, and service contracts.
  - Others
  For non-lease amounts, this field is automatically set based on the selected Non-Lease Category, but can be modified as needed.
Set the following fields in the Payment section:
- In the Payment Frequency field, indicate how frequently payments are made.
- The Amount Frequency field indicates how frequently the total amount is applied (e.g., daily, monthly, annually). It is automatically set to "One Time", which means that the even if there is a partial month, the payment amount is always equal to the Amount. If you need to change this amount, change to Advanced Mode.
- In the Amount field, enter the payment amount in contract currency. Note that you can enter negative amounts only for Free Rent / Reduction, Cash Incentive, or Non-Lease terms.
- In the field First Payment Date, specify the date of the first payment.
- In the field Payment Term End Date, specify the cut-off date for the last payment. The last payment will still occur on the same day of the month as the rest of the payments.
Note: For Cash Incentive terms, the Amount Frequency and Payment Frequency are automatically set to "One Time", and the First Payment Date can only be prior to or equal to the ROU Start Date. The Duration, Payment Mode, and Timing fields are also automatically set. For Free Rent/Reduction terms, the First Payment Date should be on or after the ROU Start Date and payment dates should match those of Base Rent terms (including Payment Frequency and timing).
Define the length of the term in the Duration section:
- Enter the duration in between the First Payment Date and Payment Term End Date in the field Term (months) and Term (days). This will automatically set the Payment Term End Date if it has not already been set.
- If required, set the Notification Date.
In the Payment Mode section, enter the following information:
- Payment Calculation Mode is automatically set, based on the Amount Frequency selected. This field determines how the amount is broken down to calculate the payment:
  - Daily: The application breaks down the Amount and Amount Frequency values to a daily rate and calculates the payment based on the Payment Frequency.
  - One Time: This mode is used with "One Time" Amount Frequency. The application sets the payment to the value of the Amount field.
- Set the Payment Mode to one of the following values. Note that this field cannot be set if the Amount Frequency is One Time, unless the contract uses Provisioning.
  - Advance: The rent amount paid covers the interest expense generated from the current payment date until the next payment date. The Payment Timing field determines if the current or next payment date is part of this period.
  - Arrears: The rent amount paid covers the interest expense generated from the previous payment date until the current payment date. The Payment Timing field determines if the previous or current payment date is part of this period.
    Warning: Selecting "Arrears" automatically changes the Amount Frequency field to "One Time", and it cannot be changed.
In the Timing section, enter the required information:
- Use the Month End checkbox if the First Payment Date is set to the last day of the month (e.g., February 28 or April 30). If it is checked, all subsequent payments occur on the last day of the month. If it is unchecked, all subsequent payments occur on the selected day of the month.
- In the Payment Timing field, select "Start of Day" or "End of Day" to indicate when the payments occur. This field should be carefully set in conjunction with the Payment Mode. For example, an arrears payment at the beginning of the day on Feb. 1 will cover the interest expense generated for the month of January. This is equivalent to an arrears payment at the end of the day on Jan. 31.
If Generate Vendor Invoice was selected on the contract Accounting page and there are multiple partners associated to the contract, you can set up the Payment Split percentages for each partner. The Payment Split section is only displayed after the First Payment Date is set, and only displays partners with effective dates that correlate to the First Payment Date. If Calculate Taxes was selected for lessee contracts, you must also define the tax calculation for each lessor.
- Percentage: Select the portion of the payment associated to each lessor.
- Calculate Taxes: In lessee contracts, unselect the checkbox if the lessor does not need to have taxes calculated for their portion of the payment.
- Tax Jurisdiction: Select the correct Tax Jurisdiction for each lessor.
- Tax Code Determination: Hover over the ID to view the configured Tax Code, Exemption Tax Code, and Exemption Percentage.
- Tax Exemption Percentage: If required, override the default percentage.
Click Submit.

To add lease component payment terms using the advanced form:

Open the lease component.
At the top of the contract, navigate to the Terms & Conditions page.
Click and select "Lease" or "Non-Lease" to determine whether the term amount is a lease or non-lease amount. In the New Terms and Conditions window, note that some options may not be available (based on the selected term type).
Click the Advanced Mode switch to have access to all of the fields.
In the General Information section, enter the required information. Note the following:
- Type: For lease amounts, select "Payment Term".
- Non-Lease Category: For non-lease amount, select the valid expense category.
- Name: For lease amounts, select the correct term and condition name:
  - Base Rent
    Note: To add Prepaid rent, add a Base Rent term with both the First Payment Date and the Payment Term End Date set to be before the ROU Start Date.
  - Free Rent / Reduction: The amount (entered as a negative value) reduces the base rent or extension amount, but cannot result in an overall negative value. Note that you can use this term for cash incentives received after the ROU Start Date.
  - Extension
  - Purchase Option: This term is only available for lease components under lessee contracts.
  - Termination Option
  - Expected GRV: This term is only available if a Guaranteed Residual Value was entered on the Definition page, and if the lease component belongs to a lessee contract.
  - Cash Incentive: The amount (entered as a negative value) is the paid and received amount that reduces the asset, with no impact on the liability. Note that this term can only be added at inception, and that it is not available for short term, low value, and service contracts.
  - Others
  For non-lease amounts, this field is automatically set based on the selected Non-Lease Category, but can be modified as needed.
Set the following fields in the Payment section:
- In the Payment Frequency field, indicate how frequently payments are made.
- In the Amount Frequency field, indicate how frequently the total amount is applied (e.g., daily, monthly, annually). Note that selecting "One Time" means that the even if there is a partial month (due to the Start Date and First Payment Date not being on the same day), the payment amount is always equal to the Total Amount. If your contract uses "Arrears" Payment Mode or indexed currencies, the Amount Frequency is set to "One Time" and cannot be changed.
- In the Amount field, enter the payment amount in contract currency. Note that you can enter negative amounts only for Free Rent / Reduction, Cash Incentive, or Non-Lease terms.
- When the Amount Frequency is not set to "One Time", you can set the Term Start Date (used when the payment is in arrears) or Term End Date (used when the payment is in advance), if you need the accrual days to be calculated beyond the ROU start or end dates. Otherwise, the accrual days are based on ROU Start Date and End Date.
- In the field First Payment Date, specify the date of the first payment. This date must be on or after the Term Start Date (if it is set).
- In the field Payment Term End Date, specify the cut-off date for the last payment. The last payment will still occur on the same day of the month as the rest of the payments. This date must be before or on the Term Start Date (if it is set).
Note: For Cash Incentive terms, the Amount Frequency and Payment Frequency are automatically set to "One Time", and the First Payment Date can only be prior to or equal to the ROU Start Date. The Duration, Payment Mode, and Timing fields are also automatically set. For Free Rent/Reduction terms, the First Payment Date should be on or after the ROU Start Date and payment dates should match those of Base Rent terms (including Payment Frequency and timing).
Define the length of the term in the Duration section:
- Enter the duration in between of the term in the fields Term (months) and Term (days).
  - If the Term Start and End Dates are displayed, then the Term fields are automatically updated by setting these dates.
  - If only the First Payment Date and Payment Term End Date are displayed, enter the duration in between these dates. This will automatically set the Payment Term End Date if it has not already been set.
- If required, set the Notification Date.
In the Payment Mode section, enter the following information:
- Payment Calculation Mode is automatically set, based on the Amount Frequency selected. This field determines how the amount is broken down to calculate the payment:
  - Daily: The application breaks down the Amount and Amount Frequency values to a daily rate and calculates the payment based on the Payment Frequency.
  - One Time: This mode is used with "One Time" Amount Frequency. The application sets the payment to the value of the Amount field.
- Set the Payment Mode to one of the following values. Note that this field cannot be set if the Amount Frequency is One Time, unless the contract uses Provisioning.
  - Advance: The rent amount paid covers the interest expense generated from the current payment date until the next payment date. The Payment Timing field determines if the current or next payment date is part of this period.
  - Arrears: The rent amount paid covers the interest expense generated from the previous payment date until the current payment date. The Payment Timing field determines if the previous or current payment date is part of this period.
    Warning: Selecting "Arrears" automatically changes the Amount Frequency field to "One Time", and it cannot be changed.
If required (e.g., when the First Payment Date does not align with the ROU Start Date), use the Special Payment section to override the first and/or last payment defined by this term:
- Select the checkboxes Override First Payment Amount or Override Last Payment Amount to override the first or last payment amount and enter a specific amount. For example, if the ROU Start Date is Jan. 1 and the First Payment Date is Jan. 15 with payments in advance, you may need a special payment at the start of the lease to cover the Jan.1 -Jan. 14 period.
- To change the amount of the scheduled first or last payment, set only the First Payment Amount or Last Payment Amount.
- To add an extra pro-rated or full payment amount (based on the Amount and Amount Frequency fields), set only the First Special Payment Date or Last Special Payment Date. If the Term Start Date (for payments in arrears) or Term End Date (for payments in advance) are set, then the pro-rated amount is calculated using these dates instead of the ROU Start and End Dates.
- To add an extra payment of a different amount on a different date, set both the First Payment Amount and First Special Payment Date fields, or both the Last Payment Amount and Last Special Payment Date fields.
- If the contract uses provisioning under the main accounting standard, you can also set the First Provisioning Amount or Last Provisioning Amount to change the spreading of the provision accrual (without changing the overall amount). For a simple example, if the provision accrual is expected to be 1000 per month for the first quarter with periodic Provision Frequency but the First Provisioning Amount is set to 500, the provision accrual for the three months becomes 500, 1250, and 1250. Note that you cannot set these fields if the Payment Frequency is "One-Time" for both "Straight-Line" and "Periodic" Provision Frequencies, or "Monthly" for "Periodic" Provision Frequency.
  Note: If the first and/or last payment is also changed by the other overriding fields, the updated amount is then spread over the lease or payment period in the Provision Schedule.
In the Timing section, enter the required information:
- Use the Month End checkbox if the First Payment Date is set to the last day of the month (e.g., February 28 or April 30). If it is checked, all subsequent payments occur on the last day of the month. If it is unchecked, all subsequent payments occur on the selected day of the month.
- In the Payment Timing field, select "Start of Day" or "End of Day" to indicate when the payments occur. This field should be carefully set in conjunction with the Payment Mode. For example, an arrears payment at the beginning of the day on Feb. 1 will cover the interest expense generated for the month of January. This is equivalent to an arrears payment at the end of the day on Jan. 31.
If required, select the Escalating Rent checkbox. Use the fields in the Escalating Rent section to determine how much the payment amount in this term should be escalated by, and how frequently:
- By default, the Stop Escalating at Zero checkbox is selected. This ensures that if the rent is de-escalating, it stops at zero and does not result in a negative payment.
- In Escalating Rent Amount/Percentage, enter the escalating rent amount or escalating percentage.
- Set the Escalating Rent Type:
  - Fixed: The Amount and Amount Frequency defined above is increase by the Escalating Rent Amount.
  - Percentage: The Amount defined above is increased by the following formula:
    (Amount + previous calculated escalating rent amount) x Escalating Rent Percentage + (previous calculated escalating rent amount)
    - For example, if the Amount is 1000 and the Escalating Rent Percentage is 10%, then the first escalating rent amount is 100, and the second is (1000+100)*0.10 + 100 = 210.
- In Frequency Offset, enter the number of payments before the first escalation.
- In Escalation Frequency, enter how frequently the escalation occurs (according to the Payment Frequency). For example, enter 1 to escalate the rent every payment, and enter 2 to escalate the rent every other payment. Note that if you set this field to 0, the escalation amount does not increase with every payment.
- If you need the escalation to start mid-way through its calculation (e.g., you are entering a contract in Nakisa Lease Accounting Suite that has already started), use the Escalation Fast Forward field. Enter the number of payments after which the escalation calculation should continue. For example, if there are monthly payments and escalations, and you need to have the escalation calculation start at the fourth month, set the Escalation Fast Forward to 3.
If Generate Vendor Invoice was selected on the contract Accounting page and there are multiple partners associated to the contract, you can set up the Payment Split percentages for each partner. The Payment Split section is only displayed after the First Payment Date is set, and only displays partners with effective dates that correlate to the First Payment Date. If Calculate Taxes was selected for lessee contracts, you must also define the tax calculation for each lessor.
- Percentage: Select the portion of the payment associated to each lessor.
- Calculate Taxes: In lessee contracts, unselect the checkbox if the lessor does not need to have taxes calculated for their portion of the payment.
- Tax Jurisdiction: Select the correct Tax Jurisdiction for each lessor.
- Tax Code Determination: Hover over the ID to view the configured Tax Code, Exemption Tax Code, and Exemption Percentage.
- Tax Exemption Percentage: If required, override the default percentage.
Click Submit.