My Oracle Support Banner

ELA: Lease Modification With Early Termination (Doc ID 2629936.1)

Last updated on JULY 21, 2020

Applies to:

PeopleSoft Enterprise FIN Lease Administration - Version 9.2 and later
Information in this document applies to any platform.

Symptoms

 

When an amendment decreases the scope of a lease, the system should process the change of scope as an early partial retirement and generate gain/loss.

• Lease currently has an expiration date of 1/31/2022
• Lease is anticipated to be modified in 09/2019 with an expiration date of 5/31/2020

Based on accounting guidance, the following should occur:
1. Lease classification is reassessed on the effective date of the lease modification.
2. Consideration is remeasured and reallocated.
3. The lessee would use the updated lease payments and discount rate to revise the lease liability and adjust the ROU asset in a proportionate manner.
4. Difference between the proportionate reduction of the ROU asset and lease liability is recognized in the income statement as a gain or a loss.

The system recorded an adjustment to the LL and ROU Asset for the same amount. This would be the expected treatment if it was just a modification. However, since this is a modification that decreases the scope of the lease (a full or partial termination), it is expected that the adjustment to the LL and ROU Asset will not be the same amount and that the difference between the adjustment to these two accounts would be recorded as a gain or loss.


The issue can be reproduced at will with the following steps:
1. Create a Lease with an expiration date of 1/31/2022
2. Create an amendment in 09/2019 to modify the expiration date to 5/31/2020

Based on accounting guidance, expectations are as follows:
1. Lease classification is reassessed on the effective date of the lease modification.
2. Consideration is remeasured and reallocated.
3. The lessee would use the updated lease payments and discount rate to revise the lease liability and adjust the ROU asset in a proportionate manner.
4. Difference between the proportionate reduction of the ROU asset and lease liability is recognized in the income statement as a gain or a loss.


Changes

 

Cause

To view full details, sign in with your My Oracle Support account.

Don't have a My Oracle Support account? Click to get started!


In this Document
Symptoms
Changes
Cause
Solution
References


My Oracle Support provides customers with access to over a million knowledge articles and a vibrant support community of peers and Oracle experts.