Activation Group Classifications

The Classification tab shows the Main Accounting Standard and Alternative Standard configured for the company code. Based on the configured classification thresholds for the company code and the information entered in the contract, lease component, and activation group, the system provides a suggested classification. You can then override this suggested classification, if needed, once the schedules have been generated.

Note: For lessor contracts, the only classification currently supported is Operating.

You can also use this page to modify useful life and carry-over balance information for the activation group per accounting standard. At inception, this page can be modified when the Activation Group Status is "Define".

Note that if you entered a Lease Amount GBV and did not add a term and condition, you are blocked from changing the Lease Amount GBV back to 0. If this is a required change, use the Callback option on the lease component to open it again and change the value and add a term and condition instead.

To classify an activation group:

Open the activation group.
Verify that all of the relevant data has been entered and selected, and click Generate Schedules.
At the top of the activation group, navigate to the Classifications tab.
In the Classifications section, the Confirm Classification field is automatically populated with the System Classification. If required, modify the classification. The Last Classification Date indicates the last time the classification was set or changed.
Note: If the activation group is classified under ASC 842 and a Purchase Option term is likely to be exercised or the Transfer of Ownership checkbox is selected, the classification is automatically set to Finance and cannot be changed.
The following fields are displayed in the Classification summary section for lessee contracts:
- Purchase Option: Indicates if a Purchase Option term is likely to be exercised for the activation group.
- Transfer of Ownership: Indicates if there is a transfer of ownership planned for the assets in the activation group for lessee contracts.
- Specialized Asset: Indicates if the activation group has been identified as having specialized assets for lessee contracts.
- Useful Life (Year), Useful Life (Month), and Useful Life (Day): These fields are automatically set based on the configured values for the asset class but can be modified if required. The useful life represents the life used for depreciating an asset. Changes in useful life have an impact on asset depreciation.
- Remaining Useful Life (Year) and Remaining Useful Life (Month): These fields are updated whenever there is an activation group event with the remaining useful life as of the event modification date.
- Remaining Term (Year) and Remaining Term (Month): These fields are based on the terms and conditions exercised in the activation group, and are updated whenever there is an activation group event with the remaining term as of the event modification date.
- Infinite Useful Life: Indicates if the activation group uses an asset class where an infinite useful life has been configured (e.g., for land leases). At the point when a PO term is likely to be exercised, asset depreciation stops.
- FMV/Unit (Reassessed): Indicates the value of the asset on the market. If the value is updated during an activation group event, the new value is displayed here.
- PV (Total/Unit): The application uses the Contract Rate (if specified), or otherwise the IBR, to calculate the Present Value (PV). Note the following:
  - The expected GRV payment (if it was entered) is used in the PV calculations.
- PVMLP (Total/Unit): The application usese the Contract Rate (if specified), or otherwise the IBR, to calculate the Present Value of Minimum Lease Payments (PVMLP). Note the following:
  - The expected GRV payment (if it was entered) is used for PVMLP calculations for IFRS 16.
  - The total GRV amount is used for PVMLP calculations for ASC 842.
In the Carry-Over Balance section for lessee contracts, use the following fields if you need to modify carry-over balance information that was entered in the lease component. Note you must always enter the amounts for both the company and contract currencies.
- Override Capitalization Date: Enter the date of when the asset was really capitalized.
- Company Asset GBV: Enter the current asset gross book value in the company currency.
- Company Asset AD: Enter the current asset accumulated depreciation value in the company currency.
- Company Current Year AD: Enter the current year asset depreciation value in the company currency.
- Lease Asset GBV: Enter the current asset gross book value in the contract currency.
- Lease Asset AD: Enter the current asset accumulated depreciation value in the contract currency.
- Lease Current Year AD: Enter the current year asset depreciation value in the contract currency.
In the Carry-Over Liability Balance section for lessee contracts, enter the amounts in the Accrued Interest Expense fields, per accounting standard. These amounts are used as the opening accrued interest balance in the financial schedules.
In the Carry-Over Impairment Balance section for lessee contracts, use the following fields if you need to modify carry-over balance information that was entered in the lease component:
- For leases operating under ASC 842, select the checkbox Use Straight-Line Depreciation for Operating leases to change the depreciation method to straight line for ACS 842 operating leases, if required. Note that the other carry-over balance impairment fields cannot be entered for ASC 842 leases.
- For leases operating under IFRS 16:
  - Company Impairment Reserve Balance: Enter the current accumulated impairment value in the local currency (i.e., company code currency).
  - Company Asset Non-Recoverable Impairment Loss: Enter the Non-Recoverable Impairment loss value in the company currency. Note that the Non-Recoverable Impairment loss must be less than the impairment amount.
  - Lease Asset Impairment Reserve Balance: Enter the current accumulated impairment value in the contract currency.
  - Lease Asset Non-Recoverable Impairment Loss: Enter the Non-Recoverable Impairment loss value in the contract currency. Note that the Non-Recoverable Impairment loss must be less than the impairment amount.