Lease Component Definition

Users must define lease components by entering information at contract inception, when the Contract Status is "Define".

To define the lease component:

1. Open the lease component. The Definition tab loads by default.
2. The following information is in the General Information section:
   • The ID is automatically generated.
   • If required, the Lease Component Name can be modified.
   • If required, enter a Lease Component Description.
   • The Fair Market Value (FMV) is the value of the asset on the market. It is set to 0 by default, but enter the FMV / Unit if it is known.

     Note: This field cannot be set if the contract is a short term lease or low value lessee leases. For non-lease service lessee contracts and operating lessor contracts, this field has no impact on the financial schedules.

   • For lessee contracts, the Salvage Value/Unit is set to 0 by default, but enter the value if it is required. The salvage value (or residual value) is the estimated amount of the asset at the end of its useful life. It affects asset depreciation when Transfer of Ownership is selected or a Purchase Option term is likely to be exercised.

     Note: This field cannot be set if the contract is a short term lease, or low value lease (set in the Lease Type field).

   • The Currency field shows the value that was selected for the master agreement or contract.
   • Select a value for Internal Asset Class.

     Note: If the asset class is configured with "Infinite Useful Life" set to "true" (e.g., for lessee land leases), then there is no asset depreciation if a Purchase Option is likely to be exercised. This configuration information is displayed on the activation group Classification tab.

     Note: This field is optional if the contract is a non-lease service contract, short term lease, or low value lease (set in the Lease Type field).

   • Select the Unit of Measure for the Number of Units set in the Unit Distribution section.
   • If Use Provisioning was selected on the contract Definition tab, select the Provisioning Frequency: 
     • Straight-Line (default value): The Payment Amount is summed up for the entire lease and is spread over the duration of the whole lease (i.e., the monthly provisioning expense is an average of all payments).
     • Periodic: The Payment Amount is divided across the period defined by the Payment Frequency. For example, if the Payment Amount is 1500 in arrears and the Payment Frequency is quarterly on March 31, then the amount is spread out over three months, 500 per month for January, February, and March.
   • Enter the ROU Start Date and ROU End Date. Note that for subleases, these dates are set by default to the dates of the Referenced Lease Component. The dates can be edited, but cannot be outside of the default date range.
     • Optionally, enter the duration in between the ROU Start Date and ROU End Date in the field Term (months) and Term (days). This will automatically set the ROU End Date if it has not already been set.
   • If known for lessee contracts, you can define by when the lessee must declare their End of Term Intention (set in the activation group), as per the contractual agreement. Use one of the following fields to set the Contractual End of Term Date:
     • Enter the actual Contractual End of Term Date (prior to the ROU End Date).
     • Enter the Contractual End of Term Period, which specifies how many days before the ROU End Date the Contractual End of Term Date will be set to.
   • The Approver Comment field displays comments entered in the Leave Comment pop-up when the lease component is approved.
3. In the Unit Distribution section, click Add to enter the number of units per activation group.
   • Enter an Activation Group Name and enter the Number of Units per activation group.
   • After at least one activation group has been made, optionally click to add multiple activation groups. Once all the required activation groups have been added, click Submit.
4. In the Financial Conditions section, enter the required information: 
   • For lessee contracts, enter the Guaranteed Residual Value per unit. You can add an expected guaranteed residual value via the terms and conditions and exercise it in the activation groups.
   • For lessor contracts:
     • Enter the Guaranteed Residual Value (GRV) per unit, which is the residual value of the leased asset that is guaranteed by the lessee, and is included in the minimum lease payments made by the lessee.
     • Enter the Unguaranteed Residual Value (URV) per unit, which is the value of a leased asset at the end of the agreement's term that is not the lessee's responsibility. This value is not part of the lessee's financial obligation, and is not included in the calculation of the minimum lease payment.
     • The Total Residual Value is the sum of the GRV and URV, and is automatically calculated.