When a Financed Fee has Payments in Advance the Opening Balance that Fee Is Wrong After a Transfer and Assumption
Last updated on SEPTEMBER 25, 2017
Applies to:Oracle Lease and Finance Management - Version 12.2.5 and later
Information in this document applies to any platform.
On : 12.2.5 version, Lease Authoring
When Upfront Tax is handled as a Financed Fee on a contract, the opening balance for that Fee after a Transfer and Assumption is not as expected.
If the contract is transferred on a payment date and the invoices are credited, the principal balance on the transfer / payment date is still used.
If the Invoice on the Payment date is being credited then the expectation is that the Principal Balance would be the balance before that invoice was created. That is, the value from the previous payment date.
The issue can be reproduced at will with the following steps:
1. This is for an Operating Unit that has 'Upfront Tax' enabled
2. Create a DF lease Contract say- starting on 15-Aug-2016 and a term of 36 months. Customer Name = XYZ
3. In T&C for 'Taxes and Duties' - set the 'Asset Upfront Tax' = 'Financed'
4. Create an Asset for $261,623.84. Residual Value = 0
5. Create an Expense Fee 1 for $350. 1 monthly payment of $350 in 'Advance'
6. Create another Expense Fee 2 for $2961.94. 1 monthly payment of $2961.94 in 'Advance'
7. Create a 'RENT' payment for the Asset. 36 Monthly payments of $7953.93 in 'Advance'
8. Validate the Contract
9. System does a call for Upfront Tax - and automatically creates a 'Financed Fee' for an amount of $26,132.38
10. Create a payment for the Financed fee. Monthly $795.39 for 36 Months in 'Advance'
11. Price and Book the Contract
12. Process Billing till 15-Mar-2017. It generates invoices for the RENT, Expense Fee 1, Expense Fee 2, Financed Fee Principal Payment Streams and Financed Fee Interest Payment Streams). Last streams are dated 15-Mar-17
13. Process Accrual for the contract till 28-Feb-17
14. Now process a Transfer and Assumption for the above Contract as on 15-Feb-2017. New Customer = ABC
15. On the new Contract, the Financed Fee amount defaults as $21,342.20. This is a non-editable field. There is no Upfront Tax call made at this point.
16. The above Financed Fee amount that is defaulting is NOT correct. It looks like the current code is taking the Opening Principal balance - and reducing the Principal payment components from 15-Aug-2016 to 15-Feb-2017.
17. The correct calculation would be to take the Opening Principal balance - and reduce the Principal payment components from 15-Aug-2016 to 15-JAN-2017. This is because the payment on 15-Feb-2017 will be paid by the new Customer ABC
18. Complete the T&A
18. The Old Contract is terminated. Credit memos are generated on Customer XYZ for the amounts invoiced on 15-Feb-2017 and 15-Mar-2017
19. A new Contract is created on Customer ABC starting from 15-Feb-2017
20. On the new Contract, as indicated above, the Financed Fee amount is wrong. Since this amount is used for Principal and Interest split, the Interest income that gets calculated is also wrong. This leads to recording a higher Income for such deals
The issue has the following business impact:
Due to this issue, users cannot complete these transfers with the correct fee amount.
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