Lease assets by guntupalliharikrishna

Lease Assets SAP FI-AA

Leased Asset

Leased

Asset

2

Leased Assets: Leased assets create special accounting requirements for the lessee. During

the term of the lease, leased assets remain the property of the lessor or

manufacturer. They represent, therefore, a special form of rented asset. Such assets are legally and from a tax perspective the responsibility of the

lessor, and are not relevant for assessing the value of the asset portfolio of the lessee. However, in certain countries, you are nonetheless required to

capitalize leased assets, depending on the type of financing.

Leased assets create special accounting requirements for the lessee. During

the term of the lease, leased assets remain the property of the lessor or manufacturer. They represent, therefore, a special form of rented asset.

Such assets are legally and from a tax perspective the responsibility of the lessor, and are not relevant for assessing the value of the asset portfolio of

the lessee. However, in certain countries, you are nonetheless required to capitalize leased assets, depending on the type of financing.

The Leased Assets component enables you to capitalize leased assets in the Asset Accounting (FI-AA) component using the capital lease method. The

system calculates the acquisition value from the present value of the future

lease payments in the leasing agreement.

Features :

There are different ways of handling the values of leased assets in the system. Depending on legal requirements and the conditions of the lease,

there are two different options:

• You have to capitalize and depreciate certain leased assets (capital

lease).

• You treat others as periodic rent expense, which flows into the profit and loss statement (operating lease).

This second type is not relevant to the fixed assets of the lessee. It is

therefore sufficient to do one of the following:

Manage operating leases as statistical assets in the Asset

Accounting component (with no active depreciation areas)

Manage them only as cost-accounting values (or for group

accounting) in the corresponding depreciation areas

Leased Asset

Leased

Asset

3

There is a special report on rent liability that can be used for all types

of leased assets (see below).

You can also manage insurance values for purely statistical leased assets

(without depreciation areas). You enter a manual insurance value and an index series for the leased assets in the asset master record. You obtain

reports on these values using the standard report for insurance values.

Valuation Methods for Leased Assets:

The result is that there are two different methods for handling the bookkeeping for leased assets, depending on legal requirements and the

conditions of the lease. You must capitalize and depreciate certain leased assets (capital lease). Others are handled as periodic rent expense, and flow

into the Profit and Loss statement (operating lease).

Capital Lease Method :

Leased assets can be capitalized in the Asset Accounting component using the capital lease method. The system calculates the acquisition value from

the present value of the future lease payments in the leasing agreement. To

be able to determine the future burden of payment, you need to maintain the following leasing conditions in the asset master records:

• Amount of lease payment

• Number of payments

• Payment cycle

In order to calculate present value, also enter an interest rate. The system requires that you post a leasing partner as a vendor in the asset master

record at the time of the acquisition posting (opening posting).

At the present time, the capital lease method can only be used for assets

that are capitalized in the book depreciation area. An opening posting with simultaneous creation of leasing liability is not possible for assets that have

only cost-accounting depreciation areas.

Implementation Considerations:

General Tips

If you want to manage capitalized leased assets in the system, follow these steps:

• Define leasing types in Customizing for Asset Accounting with the specifications for posting asset acquisitions.

• Create special asset classes and account allocations for your leased assets.

Leased Asset

Leased

Asset

4

• Define depreciation areas, in which you plan to capitalize leased assets

using the capital lease procedure, so that they manage interest that can be posted with the depreciation posting program.

• Activate the depreciation areas, in which the leased assets will be capitalized and depreciated, in these asset classes.

• Assign a leasing type to the asset master records for leased assets.

• Maintain the information and conditions of the leasing agreement in the

master records of the leased assets. Specify an interest rate for calculating the present value and determine

Configuration Document for Leased Assets:

Specify Account Determination for Lased Assets:

SPRO → Financial Accounting (New) →Asset Accounting → Organisation Structure → Asset

Classes → Specify Account Determination.

Select

Leased Asset

Leased

Asset

5

Save. .

Create Screen Layout for rules for Assets Class

SPRO → Financial Accounting(New) → Asset Accounting → Organisation Structure → Asset

Classes → Create Screen Layout rules.

Select the Screen Layout for Leased Assets

Leased Asset

Leased

Asset

6

Select F6 to copy as

Leased Asset

Leased

Asset

7

Change the Screen layout rule & Name it. Save .

Define number interval for assigning asset main numbers in the asset class. T.Code – AS08.

SPRO → Financial Accounting( New) → Asset Accounting → Organisation Structure → Asset

Classes → Define number range interval.

Enter Company Code and Click on Change Interval Button

Click on Shift + F1 to Insert Interval . Insert the Serial no & number ranges for the same

Leased Asset

Leased

Asset

8

.

Save .

Creation of Asset Classes for Leased Asset. T.Code: OAOA

SPRO → Financial Accounting(New) → Asset Accounting → Organisation Structure → Asset

Classes → Define Asset Classes .

Select

Enter the Asset Class, Description for the Asset, Account determination key, Screen Layout,

Number range and select the include asset check box to use the asset for material management

purposes.

Leased Asset

Leased

Asset

9

Save. .

Creation of General Ledger Accounts.

Create general Ledger Account for Lease Asset, Accumulated depreciation account for leased

assets, Interest Paid Account & Interest Clearing Account using FS00.

Integration with general Ledger Accounts TCODE:AO90

SPRO → Financial Accounting (New) → Asset Accounting → Integration with the General

ledger → Assign G/L Accounts.

Select Chart of Depreciation and select Chart of Accounts. Double click on Account Allocation.

Select Chart of Accounts and double click on Account determination key.

Select Account determination for Leased Assets and double click on Balance Sheet Accounts

folder and double click on Book Depreciation Area

Leased Asset

Leased

Asset

10

Save. .

Fields Enter the Leased Assets Account number in the Acquisition & Production Costs field.

Fields Enter the Scrapping of Asset number in the Loss made on retirement without Revenue field

Enter the Revenue on Sale of Assets Account in the Clearing Account revenue from Asset Sale

field.

Enter the Profit on sale of assets account in the Gain from the Asset sale field.

Enter the Loss on sale of Assets account in the Loss from the asset sale field.

Select Depreciation Folder and select Book Depreciation.

Leased Asset

Leased

Asset

11

Save. .

Fields

Enter Accumulated Depreciation on Leased Assets Account in Accumulated Depreciation

account for Ordinary Depreciation field.

Enter Depreciation expense account in the Expenses account for Ordinary Depreciation field.

Enter Interest paid Account in the Expense Account for Interest field.

Enter Interest clearing Account in the Clearing Interest posting field.

Determining Depreciation Areas in Asset classes by activating the asset class.

T.Code: OAYZ

Leased Asset

Leased

Asset

12

Deselect the deactivate check box to activate the depreciation area for the asset class.

Save. .

Set indicator for the interest of depreciation area for calculating Interest. T.Code:OABZ

SPRO → Financial Accounting(New) → Asset Accounting →Special

Valuation→Interest→Determine Depreciation Areas.

Save.

By activating the interest indicator you can calculate interest in the depreciation areas.

Specify Depreciation Area for Group Assets. T.Code: OAYM

SPRO → Financial Accounting(New) → Asset Accounting →Valuation→ Group

Assets→Specify Depreciation areas for Group Assets

Leased Asset

Leased

Asset

13

Select the Group assets check box of Depreciation area as per Income tax Act 1961 to allow the

group Assets for calculating depreciation.

Specify Asset Classes for Depreciation on group assets: T.Code: OAAX

Select the check box of group of assets of your company code to calculate depreciation for the

group of assets.

Define depreciation calculation methods (Base method, Declining balance method & Multi

Level method for all the assets)

Define period controls & Calendar assignments for all the assets for asset acquisitions &

Retirements. T.Codes:OA84 & T.Code: OAVH

Define depreciation keys for leased assets T.Code: AFAMA

Leased Asset

Leased

Asset

14

Enter Depreciation Key & description for the depreciation key.

Save. .

Select assignment calculation method.

Select

Enter Dep Type: Ord. Depreciation

Phase: From the start of Depreciation

Fields Base Method:0014

Decl.bal.method:001

Prd.control:001

Multi level method: C01

Class: Straight Line Depreciation

Leased Asset

Leased

Asset

15

Select next entry button and enter the following values

Base Method:0028

Decl.bal.method:001

Prd.control:001

Multi level method: C01

Class: Straight Line Depreciation

Save. .

Create of Group Assets using the T.Code:AS21

Leased Asset

Leased

Asset

16

Creation of Leased asset T.Code:AS01

Enter the values in the following fields:

Asset Class:

Company Code:

No.of .Similar Assets:

Press Enter Key after entering the above values.

Enter Description for Leased Assets in the General Tab.

Select the Depreciation Tab & Enter the following fields

Depreciation Key for Book Depreciation:

Depreciation Key for Tax Balance Sheet:

And enter the useful life of the Leased asset.

Leased Asset

Leased

Asset

17

Select the Leasing Tab and enter the values in the following fields.

Leasing Company:

Agreement Number:

Agreement Date:

Notice Date:

Lease Start Date:

Lease Length:

Type of Lease:

Base Value as new:

No. of Lease Payments:

Payment Cycle:

Lease Payment:

Annual Interest rate:

Leased Asset

Leased

Asset

18

Save. .

Display Assets data using AS03

After entering the values in the fields press Enter Key.

Select the Leasing Tab. It will display the button.

Leased Asset

Leased

Asset

19

Click the button, It will take you to the following screen.

In the above screen press enter to post the entry.

The Journal Entry for the Transaction will be as follows.

Leased Asset

Leased

Asset

20

Asset A/c Dr 113,745.08

Interest Clearing Account Dr 6,254.92

To Asset vendor A/c 10,000

To Asset vendor A/c 10,000

To Asset vendor A/c 10,000

To Asset vendor A/c 10,000

To Asset vendor A/c 10,000

To Asset vendor A/c 10,000

To Asset vendor A/c 10,000

To Asset vendor A/c 10,000

To Asset vendor A/c 10,000

To Asset vendor A/c 10,000

To Asset vendor A/c 10,000

To Asset vendor A/c 10,000

The entry will be shown as like this.

Leased Asset

Leased

Asset

21

After executing the depreciation run (Tcode: AFAB), Depreciation for the Asset &

the Interest will be transferred to the respective accounts.

The Journal Entries after the execution of Depreciation run will be as follows.

Interest Paid A/c Dr xxxx

To Interest Clearing A/c xxxx

Depreciation A/c Dr xxxx

To Accu. Dep on Assets A/c xxxx

→ Interest amount will be transferred from Interest clearing account to Interest

Expense Account after the execution of depreciation run.

→ By the end of the lease period all the balance in the interest clearing account will

be transferred to Interest expense account.

Leased Asset

Leased

Asset

22

Thank You

for Your Time !