Asset Leasing guide in D365FO

In this blog post, I’ll provide a brief understanding of the processes involved in asset leasing.

Introduction

Asset leasing is an advanced capability for managing, tracking, and automating financial transactions for leased assets in D365 Finance. Asset leasing captures and processes information about the leases and helps generate journal entries throughout the lifecycle of the lease, from initial recognition, monthly journal entries, to impairment and termination of the lease.

Pre-requisites

Lease Journal names

Navigate to:

1.????? General Ledger > Journal setup > Journal names

2.????? On the Action pane, click +New

3.????? Create Lease journal names with Journal type – Asset leasing

Map lease journals to Parameters

Navigate to:

1.????? Asset leasing > Setup > Asset leasing parameters > Leases

2.????? Map all created journal names above under designated field

Lease books

Navigate to:

1.????? Asset leasing > Setup > Lease books

Lease groups

Navigate to:

1.????? Asset leasing > Setup > Lease groups

Map books created above to lease group

1.????? Select Lease group

2.????? Click on Books > Map book

Map lease accounts

Navigate to:

1. Asset leasing > Setup > Asset leasing parameters > Accounts
2. Map Books and the accounts against each lease group

Process| Create a Lease

The following steps below outline the process of creating a lease in the D365 system.

Navigate to:

1.????? Asset leasing > Leases > Lease summary

2.????? On the Action pane, click +New

3.????? Expand the General fast tab and complete the mandatory fields

a.????? Lease Description: Complete the field with a relevant text to identify the lease

b.????? Fair value of the asset: This is usually included in the contract however if it is not indicated, enter an amount for an asset of similar market value. This value is used to classify the lease as either Finance or Operating

c.?????? Implicit rate(%): Enter the implicit rate of the lease; usually not required, if not in the lease terms, where it is not specified, the borrowing rate will be used to discount the lease payments

d.????? Incremental borrowing rate (%): Must be included for publicly trading organisations to indicate debt with similar profiles and term risks

e.????? Compounding interval: automatically set to Monthly, however can be modified where required

f.??????? Asset useful life: Calculated from the lease commencement date, enter the remaining periods of useful life

g.?????? Under the Lease Classification group, select Yes for the Transfer of ownership drop down menu; this is to indicate that the lease can be transferred at the end of its term

h.?????

Lease group: Select the relevant group from the drop-down menu to facilitate reporting purposes

i.??????? Under the Lease Posting group, select the relevant Annuity type for the lease; this is used to determine if the lease is due at the beginning of the payment period or at the end of the period used to discount the lease payments

4.????? Indicate the Lease start and expiration/end dates

5.????? Go to the Payment schedule lines fasttab and click +Add

6.????? Set the Period interval column to Months and set the Periods to the useful life number

7.????? Complete the Payment amount and the Index rate % columns with relevant amounts

8.????? Expand the Location fasttab and complete the Location number field

9.????? Expand the Financial dimension fasttab and complete the relevant fields

10.? Return to the Action pane and click Save, next click Create schedules

11.? Click on Books to review the asset status

12.???? Return to the Action pane and click Workflow to submit the asset for approval

13.???? Once the asset has been approved, the asset status will update to Completed

Process| Create a Lease Schedule

To view a lease schedule of an asset, navigate to,

1.????? Asset leasing > Leases > Lease summary to identify the approved asset; click on Books

2.????? Once the Books screen is open, click on the Function tab

3.????? To view the respective lease books for the asset, under the Schedules group, click on the Payment schedule/Asset depreciation schedule/Liability amortization schedule

Process| Confirm an Asset Schedule

1.????? Asset leasing > Leases > Lease summary to identify the approved asset; click on Books

2.????? Once the Books screen is open, click on the Function tab

3.????? Under the Schedules group, click on the Payment schedule

4.????? After reviewing the payment schedule, click on the Confirm schedule tab

Process| Asset Leasing Journal

After reviewing the calculated amount, you can create the Initial recognition journal entry on the Initial recognition tab. To do this, navigate to,

1.????? Asset leasing > Leases > Lease summary to identify the approved asset; click on Books

2.????? On the Action pane, click the Function tab

3.????? Under the Function group, click Initial recognition

4.????? To review the proposed initial recognition entry before you post it, go to the Journals group, click Asset leasing journals

5.????? From the Overview fasttab, click on the Journal batch number to open the journal lines

6.????? Once the journal lines page opens, click Lines to review the journal before posting

7.????? Return to the journal lines list page and click Post

Process| Adjust a Lease Asset

After confirming and posting an asset lease journal, adjustments can be made where necessary.

To adjust a lease,

1.????? Go to the Maintain group and click on Adjustment wizard

2.????? When the wizard opens, a process roadmap will display, click Next to progress

3.????? If necessary, adjust the Modification start and Posting dates as required; Click Next

4.????? Click the Lease adjustment schedule and adjust the Payment amount field as required?

5.????? Click Next, on the Preview screen, check the Show accounting currency amounts checkbox

6.????? After confirming the screen details, click Submit to Workflow for approval

7.????? After having the adjustment approved, return to the Adjustment wizard and click Finish

8.????? On the Action pane, under the Maintain group, click the Lease version history tab

9.????? Return to the Books screen and submit to Workflow

10.? After having the adjustment approved, the lease status will be updated to Completed

Process| Lease Payments Index Rate Revaluation

This process documents the adjustment that is made to the lease liability for a right-of-use (ROU) asset when variable lease payments change because of a change in the index rate.

To carry out this adjustment, navigate to,

1.????? Asset leasing > Periodic > Index rate revaluation

2.????? On the Action pane, click Lease index revaluation

3.????? The Index revaluation parameters screen opens. Under the Records to include fasttab, click the Filter hyperlink to filter and select which lease books, leases, lease groups, or other criteria should be used when you select the leases to revalue.

4.????? After selecting the relevant leases and criteria, click OK to exit the screen

5.????? Select only the leases to be revalued and select OK to revalue the lease payments

6.????? To view the transactions that were created for a specific index revaluation process, select the process ID, and then select Transactions

Process| Reverse Posted Lease Transactions

Transactions created through asset leasing can be reversed. To do this,

1.????? Identify a posted and confirmed asset for which the transactions are to be reversed

2.????? From the Books tab, click on the Function tab

3.????? Under the Transactions group, select the Liability transactions tab

4.????? Identify the Transaction type to be reversed; select the Lease payment option

5.????? On the Action pane, click Reversed transaction and click OK

6.????? A system generated message will inform of the reversal

Process| Propose a Lease Termination

To terminate a lease, navigate to

1.????? Asset leasing > Leases > Lease summary to identify the completed asset; click on the Lease tab

2.????? On the Action pane, under the Maintain group, select Termination Proposal

3.????? The Lease termination proposal screen will open for you to complete the relevant areas

4.????? Indicate the Termination and Posting dates

5.????? Click Termination proposal to review before posting

6.????? A system generated message will inform you of the termination proposal being registered

7.????? Go to Asset leasing > Leases > Lease terminations

8.????? Identify the asset previously marked for termination and click Workflow to submit through the approval process

9.????? Once the proposal has been approved, identify the lease marked for termination; this will activate the Terminate tab on the Action pane

10.? Click Terminate and then OK to exit the screen

11.? To review the Lease status go to Asset leasing > Leases > Lease summary > Books?

Process| Create a payment Invoice or Depreciation Expense Journal

You can create monthly invoices for individual leases in D365.

Navigate to,

1.????? Create a new asset as described in steps 1-12 in the Process| Create a Lease section

2.????? Once the lease is approved, go to Asset leasing > Leases > Lease summary to identify the completed asset; click on the Books tab

3.????? Click Payment schedule (or Asset depreciation schedule for depreciation expenses), then Create journal

4.????? Return to the Books form; click the Function tab and under the Journals group, click Invoice journals and select the invoice which must be paid?

5.????? Find and retrieve the journal number which was previously created and verify it before posting to the General ledger

6.????? After checking the journal, click Post

7.????? Next go to Asset leasing > Periodic > Batch journal creation

8.????? Under the Parameters fasttab, go to the Select schedule drop down menu and select the Payment schedule option

9.????? Complete the Book ID field with the relevant Lease ID number and click Select

10.? Complete the From and To date fields to ensure you capture the invoices dates

11.? Click OK

12.? To confirm the posting of the Invoice journal, go to Books > Payment schedule; the selected invoice line should be checked as Posted

?That’s all for this blog post. Keep Exploring!!

THANK YOU!

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