Setting up a day 1 loss lease

You can set up a lease with a day 1 loss. A day 1 loss lease is in reference to exit or disposal cost obligations (ASC420). This is for an existing lease that is transitioned to TRIRIGA®.

Procedure

  1. Set Exit or Disposal Liability Carryover.
    Important: The amount must be a negative value. The ROU asset is adjusted by the amount entered. Also, the entered amount is considered as a loss on the transition first period.
  2. If a local reporting is required, check Local Reporting Required field. See Local Reporting.
  3. Set the Business Unit if it has not been set, Lease Type, Implicit Rate if it is known or else, set the Incremental Borrowing Rate.
  4. Enter values such as Fair Market Value, Economic Life of Asset. Answer questions in the FASB/IFRS Treatment section and click Calculate Lease Treatment.
  5. Enter values such as Fair Market Value, Economic Life of Asset. For GAAP/GASB lease, answer questions in the GAAP/GASB Classification section and click Calculate Lease Classification. For IFRS lease, click Recalculate NPV on the Lease Classification section.
    Tip: If thresholds set on the Application Settings are not desired, override the thresholds by clicking the Update Thresholds action.
    In Term Assumption section, the Include In Amortization Schedule field is now visible.
  6. Click on Recalculate NPV action when the NPV is needed to be re-calculated without calculating the classification.
  7. Review all the information and click Generate Accounting Schedules.
    The status is changed to Processing.
  8. Once the status of the lease is back to Draft Accounting In Review, review the generate accounting schedules.
    Note: If the lease currency and functional currency (specify in the selected business unit) are different, then the Historic Rate, Previous Blended Rate, Current Blended Rate, and Previous FX Rate on the Schedule Summary section will be updated with the latest FX rate of the Accounting Start Date. If no currency conversion is found, or the lease currency and functional currency are the same, then those fields will be updated with 1. The same will be populated for the Local Historic Rate, Local Previous Blended Rate, and Local Current Blended Rate on Amortization Summary section of the Local Reporting tab.
  9. If everything is good, click Activate.
    The lease event JEs will be created along with a draft lease event contract summary balance record. It stores the functional currency amounts of lease event JEs for the current open period. The contract summary balance record can be accessed on the Contract Summary Balance section of the History tab of a lease.
    Note: For GASB 87 Lessor and GASB 96 SBITA accounting standards, Day 1 Loss leases are not applicable.