Leases
Editing Taxes on an Out of Service Lease
The Tax Section of the Lease Accounting Module utilizes Tax Solutions, Tax Details and Rates setup within the Tax module. Because In-Service Leases cannot be changed without taking the Lease Out of Service, It is up to the user to be aware of when to update/inform the Lease for any changes made within the Tax Module.
If a Tax Detail changes from being either reclaimable or non-reclaimable, the user should take the lease out of service, make the necessary changes to the Tax Section > Tax Detail from being Included or non-Included in the Lease Valuation, regenerate the payment schedules, and revalue the lease before putting the lease back into service.
Additionally, if rates change on a Tax Detail, the user should take the lease out of service, confirm that the module is showing the rates correctly in the Tax section, regenerate the payment schedules, revalue the lease, and put back into service. Other scenarios such as adding or removing taxes would also require similar changes.
Below are the steps when needing to change taxes on a Lease:
Navigate to the out of service Lease.
Select the Change Date in which the changes should take effect.
Make the changes to the Tax section.
Regenerate the Payment Schedule. If the below are not met, you can skip this step:
The sum of the Tax Rates on the Lease Increases.
The sum of the Tax Rates on the Lease Decreases.
Revalue the Lease. If the below are not met, you can skip this step:
The sum of rate of taxes that are Included in Valuation has increased.
The sum of rate of taxes that are Included in Valuation has decreased.
Put the Lease Back In Service.
When there are changes made to the taxes included on a Lease, there may be corresponding GL Entries made by the Lease Accounting Module. Below are the different GL Entries that will be made by the module depending on the change:
If the changes made to the Tax Details of the Lease result in the Liability and RoU asset Value going up, then a GL Entry will be generated increasing both the Liability and RoU Asset as of the Change Date. The Following Instances that would dictate an increase:
New Taxes added to the Lease that are Included in Lease Valuation (non-reclaimable).
Existing Taxes are now Included in Lease Valuation (non-reclaimable).
Tax Detail Rate Increases for taxes that are Included in Lease Valuation (non-reclaimable).
If the changes made to the Tax Details of the Lease result in the Liability and RoU Asset value going down, then a GL Entry will be generated, decreasing both the Liability and ROU Asset as of the change date. Instances that would dictate a decrease:
A non-reclaimable tax detail now becomes reclaimable (Tax is no longer Included in Lease Valuation).
A Tax that is Included in Lease Valuation (non-reclaimable) has a rate Decrease.
Removal of A Tax that is Included in Lease Valuation (non-reclaimable).
If changes are made to the taxes that neither increase or decrease the Liability RoU Asset value, then no GL Entries are needed. Instances where no Entries are needed:
A reclaimable (not included in lease valuation) tax detail is added to the lease.
A reclaimable (not included in lease valuation) tax is removed from a lease.
All non-reclaimable tax detail rates stay the same.
