Calculating index adjustments

To calculate adjustments that are based on your current cost index, such as the consumer price index (CPI), you can open and submit Index Adjustment Calculator records. After the issued record is approved, the application creates a payment adjustment for the payment line items affected.

1. Create a base rent payment schedule for the full rent period, rather than for each year.
2. Create an index adjustment lease clause by selecting the Includes Index Adjustment check box on the clause.
3. Fill in Index Adjustments section, including the minimum and maximum percentage to be applied when the lease is activated, and associate the base rent payment schedule.
   An adjustment reminder can be set up to send an action item and notification that is visible on the home page in the Reminders > Notices section. When creating an index clause, the Year of Adjustment is required and the Adjustment End Date will be calculated based of the First Adjustment Date and Year of Adjustment. The Adjustment End Date is mapped to the End Date field on the Index Adjustment Calculator record.

   Important:

   • No logic is tied to the Lifetime Min % Increase and Lifetime Max % Increase fields on the clause.
   • When the Maximum % Increase is set to zero on the Index Adjustment Calculator record, the value is treated as infinite, with no maximum.
4. Click Submit for Accounting Reviews.
   The system creates payment line items. The minimum % (floor) is applied on top of the scheduled payment.
5. Next, the Lease Accountant must calculate the lease treatment and lease classification and generate the accounting schedules.
   The net rent in the accounting schedules has the minimum % (floor) applied on the top of the base rent.
6. Once the accounting schedules are generated, activate the lease.
   The Index Adjustment Calculator records are created. They can be found at Payments > Payment Processes > Related Reports > Index Adjustment Calcs Processing Details.
7. Open the Index Adjustment Calculator record.
8. Specify the details for the index adjustment in the Calculator section, including the base index and the new index, and then click Calculate.
   This calculates the Adjustment Amount per payment schedule by the %Used. The first adjustment is done using the scheduled amount and the subsequent adjustments are done using the last adjusted amount. The Use Average option for the New Index field requires that you first add records to the Reference Index section of the Index Adjustment Calculator record.
9. Issue the record.
   You can find the issued record by selecting Contracts > Payables > Real Estate Transactions > All Scheduled Index Adjustments.
   When the record is issued, payment line items are updated with the adjustment amount from the start date of the Index Adjustment Calculator, which is based on the adjustment frequency, to the end of the adjustment. For GAAP/GASB ASC842 schedules, only the Variable Lease Payment column is populated with the adjusted amount. For IFRS16 schedule, the Net Rent Payment is included the adjusted amount and the NPV, ROU Asset, and accounting schedule are re-calculated. The accounting schedules for ASC840/IAS17 are not impacted. Note that the issued Index Adjustment Calculator cannot be revised. If it is revised, the adjusted amount that had been applied on the payments will not be reverted. .