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Associate fixed assets with leases

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Important

Some or all of the functionality noted in this article is available as part of a preview release. The content and the functionality are subject to change. For more information about preview releases, see Service update availability.

The article explains how to associate an existing fixed asset with a new lease. When you associate a fixed asset with a lease, the right-of-use (ROU) asset value at initial recognition will be the acquisition cost of the fixed asset.

Before you can associate a fixed asset with a lease, you must create a record for the fixed asset in Fixed assets. Then, on the Lease summary page, you must create a lease and link the asset to that lease.

  1. Add a lease by following the steps in Add or copy leases. On the Add lease page, in the Fixed asset number field, select the asset that hasn't yet been acquired.

  2. Select Books, and confirm the payment schedule.

  3. Select Initial recognition.

  4. Select Asset leasing journal.

    The initial recognition journal entry for the lease debits the fixed asset for the amount that is usually debited to the ROU asset account.

    You can now view the transaction type and book for the fixed asset.

  5. Select Journal details.

  6. Select Lines to view the individual lines for the journal entry.

  7. Select the journal line that contains the asset, and then select the Fixed Assets tab.

    The Fixed assets tab shows the transaction type and the book. By default, the Transaction type field is set to Acquisition, and the Book field is set to the current book for the fixed asset.

After you post the initial recognition journal entry, the transaction appears as an acquisition transaction for the fixed asset. To view the transaction table, go to Fixed assets > Fixed assets > Fixed assets, select the appropriate asset, and then select Valuations. You should see that the initial recognition journal entry has created an acquisition transaction for the specified fixed asset.

The fixed asset can now be depreciated by using the standard depreciation functionality in Fixed assets. For more information about depreciation, see Depreciation methods and conventions.

When a lease is associated with a fixed asset, the Service life field on the fixed asset book will be updated to align with the smallest value from the following criteria:

  • The asset’s useful life
  • The lease term from the associated lease book

If the Transfer of ownership field is set to Yes for the lease book, the value in the Service life field will always be the asset’s useful life.

The Service life will be updated every time the lease is adjusted to ensure that the right-of-use asset is depreciated over the term lease, as if it were depreciated in Asset leasing.

Note

If you associate a fixed asset with a lease, the Asset depreciation and Lease impairment buttons are disabled in Asset leasing. You can view asset depreciation and lease impairment transactions from Fixed assets. The Asset transactions button, which opens an inquiry form is also disabled. You can also open the Asset transactions inquiry form in Fixed assets.

The Fixed assets and Fixed asset book pages will display the lease ID that is associated with a fixed asset. If a fixed asset is associated with a lease, the lease ID and lease description will be displayed on the Lease information FastTab on the Fixed assets page. For fixed asset books that are associated with lease books, the Lease ID, Lease description, and Book type fields will display information for the selected fixed asset book on the Lease information FastTab, to indicate that it's associated with a lease book.