Lease accounting default settings

The following table describes the sections and fields that appear on the Lease Accounting Settings tab.

Review Assumptions Defaults

In the Assumptions Review Period field, set the default review period for performing review assumptions for the lease. The default is three months.

Borrow Rate & % Growth Assumption Defaults

In the Incremental Borrowing Rate field, set the default borrow rate to use. The value is defaulted when the lease is created. The default is 3%. Borrow rate is used in calculating the Net Present Value.

Set the Index Growth % field with defaults for Index Growth % to be used for index-based leases for the new accounting standard.

Set the FMRV Growth % field with the fair market value % default to be used for leases that include the FMRV clause.

Rent Component Assumption Defaults

Set default percentages for maintenance, tax, other, and base rent to be used for lease records that have a lease category that contains the word “Gross".

Amortization Defaults

In the Periods per Year field, set the default number of periods to be used for a year. The default is 12.

Select the Extend Rent Payments for Likely Term check box to extend the rent payments for the likely term option from the last payment schedule on the lease if no payment schedule is defined for the likely term option.

Payment Schedule Settings

Set the time zone to be used when creating payment schedules. The default is System.

Accounting Standards

Use this section to populate the settings required for lease accounting calculations for straight-line schedule/amortization and Operating/Finance schedule.

Set the Default Accounting Standard with the default corporate accounting standard. The default is GAAP (FASB).

Set the Accounting Calender. For information on creating a new accounting calendar, see Creating accounting calendars.

Set the Straight Line Calculation Basis for how the rent expense value on the Operating/Finance schedule is calculated. The default is 30-day basis. The other option is actual-day basis.

Use the Days to Consider for Accounting Period field to set the default number of days to be considered beyond a fiscal period for it to be considered a closed period.

Set the Interest Method to Simple or Compound. If you select Simple, interest is calculated based on the principal or original amount. If you select Compound, interest is calculated based on the principal or original amount, as well as the accumulated interest of previous periods.

Tip: Until you have fully set up your accounting information, you can turn off validations for the Audit Assumptions Log by clearing the Accounting Live? check box. By default it is selected.

Lease Classification Defaults

Set the lease classification defaults in this section based on Lease term greater than or equal to the asset's economic life, NPV of rent greater than or equal to the asset's FMV, and beginning of lease based on the asset's life.

New Standard Adoption

Set the GAAP Adoption Fiscal Period to the period when the new accounting standard is to be adopted. Set the GAAP Look Back Fiscal Period to the period of history needed for the new accounting standard. If you use IFRS 16, set IFRS Adoption Fiscal Period and IFRS Look Back Fiscal Period.

For GASB, set the GASB Adoption Fiscal Period to the period when the new accounting standard is to be adopted. Set the GASB Look Back Fiscal Period to the period of history needed for the new accounting standard.

To apply the start date of the Look Back Fiscal Period for metric report filtering, click the Apply Start Date to Impact Reports action. To get relief for new accounting standards for taxes and insurances, check the Lessee Transition Relief check box and enter a disclosure note in the Lessee Transition Disclosure field.

Bypass Approval

This section allows you to create settings to bypass the approval process when performing Non-Lease-Accounting Amendment.

Rules

There are two fields that you can set.

• Check Hide Confirm Message for Lease Activation? if you do not want the confirmation user message to show while activating a lease.
• Check Create Zero Value Journal Entries if you still want 0 amount journal entries to be created.