You can select specific Lease Categories to be accounted for with Standard Fixed Assets functionality (the Right-of-Use part of leases). It works by utilizing Fixed Asset calculation for depreciation (Straight-Line method in accordance with IFRS16).
Below are the differences made by using Fixed Asset functionality for leases.
Activation
To use Fixed Assets for Leases instead of Right-of-Use Schedule you would need to complete FA Setup.
If you are currently migrating leases then please refer to Migration with Existing FA.
If it is a new or a migration lease, and Fixed Asset is not within system, then you would fill in lease as usual. Depending on the Lease Category, during Signing action made from the Lease Card, a new Fixed Asset Card will be created, depending on the information filled in within the Lease Agreement.
Upon signing the lease, the Fixed Asset No. field is filled automatically in the Lease Card. The corresponding Fixed Asset's Lease No. field is also filled to link the Lease and Fixed Asset cards.
Depreciation of the lease
After the lease is successfully signed, you can review how the Fixed Asset calculates depreciation by navigating to the lease's RoU Projection. All calculations follow the standard Fixed Asset depreciation calculations.
After signing the lease, you can open up the Lease Card for any modifications to be done. The Fixed Asset is also refreshed during the Activation of the Lease Agreement.
365 Fiscal Year calculation
If you would like the Fixed Asset depreciation calculation to use the 365-day fiscal year method, you need to select this option before posting the first month. You can do this by navigating to Depreciation Books → LEASE (book) → Fiscal Year 365 Days. After making the selection, click Recalculate on the lease.
Now you can activate lease as usual and Cost for RoU will be posted in usual Lease Categories G/L account and same amount would get registered as Acquisition Cost within Fixed Asset Entries.
Now you can activate the lease as usual. The Cost for the RoU will be posted to the usual Lease Categories G/L account, and the same amount will be registered as the Acquisition Cost within Fixed Asset Entries.
Fixed Asset Entries
To quickly access Fixed Asset Ledger Entries, navigate to Related → Ledgers → Fixed Asset Ledger Entries.
To quickly access the Fixed Asset Card tied to the Lease Agreement, navigate to Projection → Fixed Asset Card.
Fixed Asset description
The Fixed Asset description is filled by taking lease's Asset Description field, or just the Description field if Fixed Asset's description field is empty.
Postings
Postings stay the same when using Fixed Assets. It is done by navigating to Role Center → Monthly Process → Post to G/L. Depreciation also posts in the Fixed Asset ledger.
Modifications
Lease modifications are processed in the same way as usual. Any changes will trigger a remeasurement.
In Fixed Asset posting, depending on the sign (positive or negative), the amount will be posted either as an Appreciation (increase) or a Write-Down (decrease).
Increase example (the price was increased from 1000 to 1200):
Decrease example (lease term was lowered from 36 months to 24 months):
Expiration
No additional entries are posted for Fixed Asset during expiration. The Fixed Asset card simply becomes inactive.
Future change planned
On expiration, Disposal entries would also be created for Fixed Asset, reversing Acquisition (also Appreciation and Write-Down) and Depreciation amounts.
Termination
Termination of the Fixed Asset happens together with the Terminate Lease action.
These are the entries created in the FA Ledger when terminating a lease:
On termination, all transactions are reversed (acquisition, depreciation, write-down, appreciation…)
Gain/Loss is calculated from the RoU and Liability balance difference, as usual.
Reversal
Reversals for Fixed Assets work the same as usual. Fixed Asset Ledger entries are reversed by entries with opposite values and are marked with the Reversed flag.
Reversal on Termination or Expiration
You can also reverse lease termination or expiration.
Reversal entries for termination postings will be created.
Proceeds on Disposal reversal
In the oldest currently supported version of Business Central, the system does not support automatically reversing Proceeds on Disposal. If this reversal is required, it must be performed manually.