E1: 15: Process For Lease Impairment or Onerous Leases
(Doc ID 2628537.1)
Last updated on MARCH 02, 2022
Applies to:JD Edwards EnterpriseOne Real Estate Management - Version 9.2 and later
Information in this document applies to any platform.
There is no functionality to support lease impairment or onerous leases. Per the standard, once a lease is impaired, the system should reduce the current ROUA balance and then re-amortize the remaining balance across the lease.
A similar function should apply to a sub lease agreement as well. It should be possible to replenish the ROUA for the sub lease amount.
Definition of onerous lease and lease impairment:
An onerous contract is a contract in which the aggregate cost required to fulfill the agreement is higher than the economic benefit to be obtained from it. ... Another example of an onerous contract is when a lessee is still obligated to make payments under the terms of an operating lease, but is no longer using the asset.
What is lease impairment?
Impairment = Fair Market Value < Carrying Value. For the lessor , when the current fair value or carrying value of the lease is less than the net investment in the lease, the impairment loss reduces the asset's overstated book value to its fair or recoverable amount.
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