Creating and Configuring Contract Components

Getting Started

Global Functions

Administration

Extended Planning & Analysis (xP&A)

Consolidation & Financial Planning

ESG Reporting

Disclosure Management

XBRL Tagger

Lease Accounting

General Functions in Lease Accounting

User Roles in Lease Accounting

All Steps at a Glance

Basic Configuration for Lease Accounting

Selecting a Lessee

Collecting Data

Creating and Configuring Lessors

Creating and Configuring Contracts

Creating and Configuring Contract Components

Importing Data Automatically

Viewing Import History

Reversing Components

Categorizing Components

Calculating Data

Creating Postings

Reversing Postings

Exporting Reports and Postings

Importing Postings into Consolidation & Financial Planning

Banking & Cash Management

Data Collection

Tax Compliance & Reporting

Glossary

Contract components are individual elements of a lease contract. Each component enables the precise recording and management of different lease terms, conditions and properties of individual underlying assets within the same lease contract.

This modular approach to recording components offers a high degree of flexibility in accounting for your leases and takes into account the complexity of modern lease contracts.

You can create and configure contract components in the Contract components workspace. You can also modify contract components that have already been calculated.

Lucanet Lease Accounting can only be used for accounting of regular leases in accordance with IFRS 16.3-4. Short-term and low-value leases are therefore not included in the calculation.

As such, we recommend only using this software to record leases that are categorized as regular per IFRS 16.3-4.

In the Contract components workspace, you can display all components that have already been created for a contract.

Select the corresponding

contract number

. To restrict the selection of contract numbers to one

lessor

, you can first select the corresponding

lessor

Use the

Active

and

Archived

buttons if you only want to see active or archived components:

Displays the Contract components workspace — The 'Contract components' workspace

To create a new component for a contract, select the contract number in the upper area and click Add component.

In the displayed New contract component dialog, configure the options as described in the next chapter.

When configuring a contract component, the following options are available:

Fields marked with a * are mandatory fields. The number of mandatory fields on each tab and how many have already been filled in is displayed next to the name of the tab:

Fields that have been grayed out cannot be edited. They are filled in automatically based on the information in Lease Accounting.

Shows the 'Leasing identification' tab, which is displayed for the configuration of a contract component. — 'Leasing identification' tab

Specify whether the contract component is an asset that is identified in accordance with IFRS 16.3-4.

Specify whether the lessee derives substantially all of the economic benefit of the asset during its useful life.

Economic benefits can be fixed, consumption-independent payments, such as fixed basic rents.

Specify whether the lessee (CUSTOMER), the lessor (SUPPLIER), or neither party (NEITHER) makes the decisions about the nature and purpose of the use of the asset.

If you select NEITHER, use the additional questions to specify whether:

The lessee has the right to operate the asset throughout the period of use, without the lessor having the right to change those operating instructions.

The lessee designed the asset in a way that predetermines how and for what purpose the asset will be used throughout the period of use?

In some cases the relevant decisions about how and for what purpose the asset is used are predetermined. For example, the lessee has the right to direct how and for what purpose the asset is used if he

is able to transform a building originally used for administrative purposes into a production building.

is able to use a vehicle originally used in Germany autonomously in a foreign country.

decides about the produced parts.

Based on the information you enter on this tab, this is where the system automatically displays whether the component is identified as a leasing component.

If the component is identified here as a non-lease component, you can cancel the recording of the components, as the component does not then have to be accounted for in accordance with IFRS 16.

Displays the 'General information' tab, which is displayed for the configuration of a contract component. — ‘General Information’ Tab

Option	Description
External contract number or ID	Displays the number of the contract to which you have assigned the component.
Component number or ID	Identification number for the component
Cost center	Cost center for the component
Start date	Start date of utilization of the related component
End date	End date of utilization of the related component without considering extension and/or termination options
Component currency	Currency in which the component should be calculated. By default, the functional currency of the selected reporting entity (lessee) is displayed.
Comments	Optional comments on the details configured on this tab

Displays the 'Underlying asset' tab, which is displayed for the configuration of a contract component. — 'Underlying asset' tab

Asset class of the component

Specify whether a purchase option has been agreed for the component.

If Yes, configure the details of the purchase option(s) by clicking Add row in the table that appears and specifying the following:

Displays the input fields for configuring a purchase option for a lease component. — 'Add purchase option' dialog

Period during which an asset is available for use by the company

Enable this option to manually enter a new interest rate in the field Incremental borrowing rate in percent, which will override the value defined during the interest rate creation, if any interest rates were configured.

You can still enable or disable manual entry of interest rates during the modification of contract components, specifically for the following modification parameters:

Lease term | Extension option/Termination option (if

reasonably certain

option is activated)

Payments | Payments

Asset information | Purchase option (if

reasonably certain

option is activated)

General information | Base lease term | Contract term reduction/extension

When

Manual entry of interest rates

is deactivated: This field is automatically populated with the pre-configured interest rate specific to the selected asset class, if an interest rate was set. If no interest rate was set, the field will remain empty or display 0.

When

Manual entry of interest rates

is activated: This field is left empty, and you need to manually enter an interest rate. The manually entered rate will override the interest rate derived from the

interest rate configuration

The lease liability is measured on initial recognition at the present value of future lease payments. For this, the future lease payments are discounted with the incremental borrowing rate of the reporting entity. The incremental borrowing rate is the interest rate that the reporting entity would have agreed to inception date of the lease, if it had to borrow funds for the same period for the purchase of the leased property.

Specify whether the contract contains any asset retirement obligations.

If yes, enter the present value of the amount of the obligation (in component currency).

Optional comments on the details configured on this tab

Displays the input fields for configuring the term of a lease component. — 'Lease term' tab

Specify whether an extension option has been agreed for the component.

If Yes, configure the details of the extension option(s) by clicking Add row in the table that appears and specifying the following:

Displays the input fields for configuring an extension option for a lease component. — 'Add extension option' dialog

Start and end date

of the extension option(s)

Whether the exercise of the extension option is

reasonably certain

The following

payment details

for each individual extension option that was created by

adding a row

For single payments for an extension option

Displays the input fields for configuring a single payment for a lease component. — Create single payment

For regular payments for an extension option

Displays the input fields for configuring a regular payment for a lease component. — Create regular payment

A detailed description of the individual fields that are configured in the Create payment dialog can be found in the description of the Payments tab.

Specify whether a termination option has been agreed for the component.

If Yes, configure the details of the termination option(s) by clicking Add row in the table that appears and specifying the following:

Displays the input fields for configuring a termination option for a lease component. — 'Add Termination option' dialog

Optional comments on the details configured on this tab

Shows the 'Payments' tab, which is displayed for the configuration of a lease component. — 'Payments' tab

Add the individual payments for the lease component by clicking Add row and specifying the following:

For single payments

Specifies whether the payment is a regular payment or a single payment.

For a single payment, choose No.

Description for the payment.

Examples for real estate: basic rent; prepayment operating expenses; rent for 1st floor, etc.

Amount entered in the contract for the payment (in component currency)

Time agreed for the single payment

Description

Specifies whether the payment is a regular payment or a single payment.

For a regular payment, choose Yes.

Description for the payment.

Examples for real estate: basic rent; prepayment operating expenses; rent for 1st floor, etc.

Amount entered in the contract for the payment (in component currency)

Specifies whether the payment is a fixed payment or a variable payment.

First and last dates of the payments

The start and end dates of the payments define the interval for a series of payments in Lease Accounting in order to represent contract-specific payment terms. The start and end dates of payments may differ from the start and end of the contract.

Choose whether payment is made yearly, half-yearly, quarterly, or monthly.

Specifies whether the payments are in advance, i.e. that the payments must be made at the beginning of the period.

Month in which the first full regular payment is made (in format MM-DD)

Examples:

Calendar month payments in arrears

Start of component term: 13 March 2022

I.e. the first full payment for a whole calendar month takes place in April. The

start date of the first full period of regular payments is therefore

(MM-TT):

04-01

If terms of payment cause regular payments to be scheduled at dates outside the defined component term, please set up those specific payments as single payments using the respective part of the payment dialog. The Lease Accounting validation will not consider regular payments scheduled for dates outside the defined component term.

For regular payments

Shows the 'Residual value guarantees' tab, which is displayed for the configuration of a lease component. — 'Residual value guarantees' tab

Specify whether a residual value guarantee has been agreed for the component.

If Yes, configure the details of the residual value guarantee by entering the following in the displayed fields:

Amount of guaranteed residual value

Amount expected to be payable under the residual value guarantee

Optional comments on the details configured on this tab

Shows the 'Additional payments' tab, which is displayed for the configuration of a lease component. — 'Additional payments' tab

Specify whether initial direct costs have been incurred.

If Yes, also specify the Total amount of initial direct costs: (in component currency).

Indicate whether incentive payments by the lessor have been agreed in the contract.

If yes, specify the following:

The

Total amount of lease incentives received (in component currency)

The

Amount of lease incentives to be received | lease incentive receivable

The

Payment date of lease incentives to be received

Optional comments on the details configured on this tab

Shows the 'Migration' tab, which is displayed for the configuration of a lease component. — 'Migration' tab

Specify whether this is a component that has already been accounted for in accordance with IFRS 16 and is now being migrated to Lucanet Lease Accounting.

If Yes, also specify the following details that will change when migrating to Lucanet Lease Accounting:

Deviating interest rate in percent

Deviating start value of the historical cost (in component currency)

Deviating start value of the cumulated depreciation (in component currency)

Net liability before application of Lease Accounting (in component currency)

Migration date

Optional comments on the details configured on this tab

Shows the 'Transition' tab, which is displayed for the configuration of a lease component. — 'Transition' tab

Specify whether this is a transition component, i.e. a component for which IFRS 16 is being applied for the first time.

If Yes, also differentiate between:

Whether it is an

operating lease

or a

finance lease

Whether it is a

provision for onerous leases

or an

impairment

Then configure the fields that are displayed based on the selection made.

Example configurations

Finance Lease

Operating lease with provision for onerous leases

Shows the input fields for the configuration of a finance lease, which are displayed when you activate the options for finance lease and provision for onerous leases on the tab — Configuration example: operating lease

Optional comments on the details configured on this tab

Components that have not yet been calculated can be edited by clicking the pencil icon and editing the tabs as described above under Configuring Contract Components.

If components have already been calculated, the fields of the tabs cannot be edited. Instead, the components must be modified as described below.

To modify a contract component that has already been calculated:

In the overview table, click the brush icon in the row of the desired component. The detail view of the components is displayed as follows, for example:

Open the modification parameters and select the change you want to implement by navigating through the displayed drop-down menu. For example, to add an extension option, select Lease Term | Extension Option | Add:

Configure the data in the displayed configuration dialog. (A description of the required information can be found in the previous Configuring Contract Component section.)

In each configuration dialog, specify the effective date from which the modification is to be included in the calculation.

Click Save.

The last modification made is displayed in the overview table in the Status column:

If applicable, click the modification in the Status column to display the modification history of the component:

For a modified component to be taken into account in postings, you must calculate and save the components as described under Measuring Data.

Components that have been calculated can be modified through modification parameters. The following modification parameters are available:

Purchase option

Change to the useful life of the asset

Proportional scope reduction

Impairment

Add/Edit Asset retirement obligation

Extension option

Termination option

Payments

Base lease term

Cost center

Reassess or add a residual value guarantee

Reassess or add an expected payment

Last updated on Aug 16, 2023

Creating and Configuring Contract Components

Overview

'Contract Components' Workspace

Creating Contract Components

Configuring Contract Components

Modifying Contract Components

Table of Contents

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