Transfer and Assumption on DF Lease Has Incorrect PRE-TAX INCOME Returned from SuperTRUMP
(Doc ID 2402063.1)
Last updated on FEBRUARY 03, 2019
Applies to:Oracle Lease and Finance Management - Version 12.1.3 and later
Information in this document applies to any platform.
On : 12.1.3 version, Generate Streams
When performing a Transfer and Assumption on a DF Lease, the 'revision' contract creates an outbound XML to SuperTRUMP to determine the streams to apply to the new contract.
One of those streams, the PRE-TAX INCOME stream, is effectively calculated as the difference between the total RENT receivables and the OEC, plus any Residual Value (as it assumes we will get the Residual Value at the end of the lease). However, when the XML is sent for a Transfer and Assumption, the RENT receivables only reflect the remaining rentals at the point of the transfer, but the outbound XML is still sending the original OEC rather than the current Net Investment value.
As a result, the PRE-TAX INCOME calculated is incorrect - it is substantially lower than the original income, when the idea of the Transfer and Assumption is to leave the overall financial parameters of the deal as they were before the customer change.
The issue happens where Reporting Products are being used for Dual GAAP, and the Primary Product is an LEASEOP but the Reporting Product is a LEASEDF, the outbound XML for the Reporting Product is sending the current CORPORATE FA Book Net Book Value, rather than the Finance Lease Net Investment.
As the NBV is a product of the Depreciation rate, and the Net Investment is a product of the Lease Accrual and Billing, they will most likely be different values, and therefore the PRE-TAX INCOME returned by SuperTRUMP will be based on an incorrect asset value and will either be too high or too low.
The issue can be reproduced at will with the following steps:
1. On a Multi Gaap product where Primary Product is an LEASEOP but the Reporting Product is a LEASEDF, book a lease contract
2. Bill and accrue
3. Perform a T&A, revise, customer change and make the revision date as the bill date
4. Price the contract and look at the streams for reporting product, the Pre-Tax income is incorrect.
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