E1: 15: Commence Generation(R15170) Interest Expense is Calculated Incorrectly when Recurring Billing(P1502) Records Are Prorated Dates In the First Period of Lease
(Doc ID 2701032.1)
Last updated on OCTOBER 05, 2022
Applies to:JD Edwards EnterpriseOne Real Estate Management - Version 9.2 and later
Information in this document applies to any platform.
It is requested that when the first payment for a lease is a partial month the interest amount is prorated bused upon the number of days.
When the beginning balance for the schedule is calculated the standard formula for calculating Present Value(PVLP) is used. The formula does not consider any payment where the period is not the same timeframe as the other periods in the schedule.
The lease accounting standards is new and companies and auditors have not fully flushed out all the nuances. There is currently no commonly accepted formula for calculating the Present Value of lease payments when there may be partial payments within the scheduled payments. Once accountants and auditors have settled on an acceptable formula JD Edwards EnterprseOne will consider applying it to our solution.
It is recommended that the customer work with their accountants, auditors, and other customers to push toward a widely accepted practice for this.
Common Business Practice Would Be:
1. Create the lease with the starting date not beginning on the first day of the month.
2. Add recurring billing not beginning on the first day of the month.
3. Run lease commencement(R15170) to create amortization schedules
4. Review Interest expense for the first period. It should be calculated for the prorated period and not for the whole month.
Currently the interest expense cannot be calculated for the prorated amount if the first period covers a prorated period as compared to a complete month.
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