Core TSIs : Lease Accounting : Working with lease accounting : Performing a remeasurement
Performing a remeasurement
A remeasurement calculates the lease liability (or lease receivable in case of a lessor contract) per modification date. The difference between the new liability and the carrying value of the liability is added to the right-of-use carrying value. Lease contracts based on lease accounting need remeasurement when the scope of the contract has been changed, i.e. when the contract changes without the change being included in the latest calculations.
Since the introduction of new lease accounting concepts in release L76, a lease remeasurement is performed automatically when the calculations are based on a new end date. The default discount rate is used for remeasurement. To apply a different discount rate, you must perform a manual remeasurement. If the automatic selection of the discount rate is configured, Planon suggests the user to apply the newly selected discount rate in the automatic remeasurement or to use the same old discount rate.
The events listed in the Automatic remeasurement section will automatically result in a remeasurement. The remeasurement calculation date is equal to the modification date. If a remeasurement is required on an earlier date than the modification date, you can perform a manual remeasurement after the transaction is completed (see Manual remeasurement).
Automatic remeasurement
Planon automatically performs a remeasurement after you do the following:
• change a renewal option from 'reasonably certain' to 'active'.
• change a renewal option from 'not reasonably certain' to 'reasonably certain'.
• change a renewal option from 'reasonably certain' to 'not reasonably certain'.
• cancele or abandon a 'reasonably certain' renewal option.
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For contract options, there is actually no difference between the Canceled status and the Abandoned status. The Abandoned status only has a more official character to indicate that you do really not want to use an option. You can only set an active option to Abandoned.
• execute an unplanned renewal option. After applying an unplanned option, the remaining open period of the lease needs to be recalculated.
• cancele a planned renewal option. After canceling a planned option, the remaining open period of the lease needs to be recalculated.
• change a termination option from 'reasonably certain' to 'active'.
• change a termination option from 'not reasonably certain' to 'reasonably certain'.
• change a termination option from 'reasonably certain' to 'not reasonably certain'.
• cancele or abandoned a 'reasonably certain' termination option.
• execute an unplanned termination option.
• change the agreements on a contract.
The value of the contract will be recalculated from the date effective of the remeasurement based on the given discount rate.
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It is not allowed to perform a remeasurement if the change date is in the renewal period.
Manual remeasurement
Procedure
1. From the Contracts selection level, select the contract for which you want to perform a remeasurement.
2. Go to Contract details > Amounts.
3. Select the required lease contract line(s).
4. On the action panel, click Perform remeasurement.
The Enter values window appears.
If you are using the automated selection of discount rates (see Using the automated selection of discount rates) a wizard is now started with a discount rate suggested by Planon (see Discount rate wizard). You can change this rate manually, if required.
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This wizard is not displayed by default. If you want to use the wizard, the setting Use automated discount rate? in Field definer > Contracts > Business object settings must be set to Yes. If set to No (default setting), no wizard is displayed and you can continue as described in the steps below.
5. In the Add modification on field, specify the date on which the change is to become effective.
6. In the Discount rate (%) field, specify the new discount rate.
7. Click Save.
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You cannot undo a remeasurement. The Undo life cycle changes action is not available.
Planon recalculates the accounting commitments based on the changed liability and right-of-use asset, from the date effective until the end date of the contract line. If a lease is calculated based on a negative discount rate, Planon changes the fixed accounts from 'expenditure' to 'income' for lessee leases and from 'income' to 'expenditure' for lessor leases.
After you performed a manual remeasurement, Planon registers a financial event with the code REMEAS. For more information, see Financial event registration.
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In some cases, when a lease is recalculated, the right-of-use may decrease and become less than zero (negative value). Since it is not possible to register a negative right-of-use or negative depreciation, Planon sets the right-of-use to zero. The decrease in right-of-use below zero is recorded as depreciation loss in Planon.