| LeasePak 6.0b Reference Guide | Print Version| Help| Search| DocSuite | Document Top |  |
| Leveraged Leases | |||
| Mechanism Accounting Updates Booking Reports | |||
| LeasePak 6.0b Reference Guide | Print Version| Help| Search| DocSuite | Document Top | |
| Leveraged Leases | |||
| Mechanism Accounting Updates Booking Reports | |||
Describes the processes for handling leveraged leases in LeasePak using input from external tables with precomputed values for income, interest, depreciation, expenses, and other amounts.
For a leveraged lease, in which a third-party creditor furnishes, on a nonrecourse basis, a major portion of the capital for purchasing the equipment, LeasePak provides a function where the lessor can use external data to supply the information needed to accommodate the additional leveraged lease accounting requirements.
To generate the input files for LeasePak, you can employ pricing tools such as Interet Corporation's LEASE, Ivory Consulting's SuperTRUMP, and Warren & Selbert's ABC, or any other program that produces leveraged lease pricing and financial modeling. The next section describes the required data and format of the input file. For further assistance, contact your NetSol representative.
Many programs have the option to export their leveraged lease financial models to a Microsoft Excel spreadsheet. You will need to organize the columns of the spreadsheet to correspond to the table below, then save the data as a tab-delimited text file (file extension .txt) before inputting it into LeasePak.
| Column | Data |
|---|---|
| a | Activity Month (format MM/DD/YYYY) |
| b | Rent, Residual and Other Income |
| c | Depreciation Expense |
| d | Interest on Loan |
| e | Amortization and Other Expenses |
| f | Tax IDC (runoff) |
| g | Taxable Income |
| h | Rental Cash |
| i | Debt Service |
| j | Other Cash |
| k | Net Rent Receivable |
| l | Unearned Income |
| m | Deferred Tax ITC (unamortized) |
| n | Deferred Book IDC (unamortized) |
| o | Residual Receivable |
| p | Deferred Taxes |
| q | Pretax Income |
| r | Tax Effect of Pretax Income |
| s | Book IDC (runoff) |
| t | Book ITC (runoff) |
| u | FSC Exclusion |
| v | Subpart F Income |
| w | Parent Income |
| x | AMT Depreciation |
| y | Depreciation Preference |
| z | Free Cash |
| aa | Nonrecourse Debt Balance |
When you load the leveraged lease input file, either during the application process or after booking using Load Leveraged table [U0228], LeasePak transfers the file records to the Leveraged Import (rli) database table.
If the leveraged lease is still an application (not yet booked), LeasePak deletes any existing information in the rli and replaces it with the new import. On the other hand, if you import a new financial model into the leveraged lease after booking, LeasePak updates lease, asset, and general ledger information based on the difference between the new and previous import files.
For booked leases, LeasePak keeps the two most recent versions of the import information in the rli table. If you need to retain versions previous to this, NetSol recommends labeling your import files with the lease number and effective date and storing them in an appropriate location.
Do not load data into the rli table directly--that is,
without using the Load Leveraged table function in either the application or maintenance update. Contact your NetSol representative for more
information.
The rli table adds two index components and a record stamp column to the existing columns of the import file; otherwise, the input file and rli table columns correspond closely. For more information about LeasePak database tables, refer to the Documentation Suite publication LeasePak Database Reference.
| File Column | File Description | rli Description | rli Column |
|---|---|---|---|
| Lease | lse_s | ||
| Version | version_s | ||
| a | Activity Month (format MM/DD/YYYY) | Month end date | d_mth_end_s |
| (DBMS record stamp) | (varies according to DBMS) | ||
| b | Rent, Residual and Other Income | Rent, residual and other income amount | rent_d |
| c | Depreciation Expense | Depreciation expense amount | depr_d |
| d | Interest on Loan | Interest on loan amount | int_loan_d |
| e | Amortization and Other Expenses | Broker fees | brk_fee_d |
| f | Tax IDC (runoff) | Amortized tax IDC amount | amort_idc_tax_d |
| g | Taxable Income | Taxable income amount | tax_inc_d |
| h | Rental Cash | Rent cash amount | rent_cash_d |
| i | Debt Service | Debt service amount | debt_d |
| j | Other Cash | Other charges | other_d |
| k | Net Rent Receivable | Net rent receivable amount | net_rent_rec_d |
| l | Unearned Income | Unearned income amount | ue_inc_d |
| m | Deferred Tax ITC (unamortized) | Unamortized tax ITC amount | unamort_tax_itc_d |
| n | Deferred Book IDC (unamortized) | Unamortized IDC amount | unamort_idc_d |
| o | Residual Receivable | Residual receivable amount | res_rec_d |
| p | Deferred Taxes | Deferred tax amount | dfrd_tax_d |
| q | Pretax Income | Pretax income amount | pretax_inc_d |
| r | Tax Effect of Pretax Income | Tax effect of pretax income amount | tax_eff_pretax_inc_d |
| s | Book IDC (runoff) | Amortized IDC amount | amort_idc_d |
| t | Book ITC (runoff) | Amortized book ITC amount | amort_itc_d |
| u | FSC Exclusion | FSC exclusion amount | fsc_excln_d |
| v | Subpart F Income | Subpart F income amount | sub_f_inc_d |
| w | Parent Income | Parent income amount | par_inc_d |
| x | AMT Depreciation | AMT depreciation amount | amt_depr_d |
| y | Depreciation Preference | Depreciation preference amount | depr_pref_d |
| z | Free Cash | Free cash amount | free_cash_d |
| aa | Nonrecourse Debt Balance | Non-recourse debt balance amount | non_recour_debt_bal_d |
After loading the input file into the rli table, LeasePak uses these amounts during normal processes (such as accrual, invoicing, and depreciation) to perform accounting and update operations for the leveraged lease.
In accounting for leveraged leases, LeasePak uses the amounts from the rli table, both for the general ledger transactions and the updates to the lease and asset records.
You can set up a separate company, region, and office (or more if needed) in which to book leveraged leases. Since each office in LeasePak contains is own discrete set of general ledger accounts, this will separate the accounting of leveraged leases from your other types of business.
If needed, you can further separate leveraged leases by booking them into their own portfolio. Most LeasePak accounting reports offer portfolio as part of the selection criteria, while only some also offer company, region, and office as criteria, so you should consider this when deciding where to book leveraged leases.
The following tables illustrate the general ledger transactions generated by various processes throughout the life of the leveraged lease. For more information about LeasePak accounting, refer to the document General Ledger Accounting.
| Debit | Credit | Amount |
|---|---|---|
| Inventory | Accounts Payable | Total of column 'c' (Depreciation Expense) |
| Debit | Credit | Amount |
|---|---|---|
| Accounts Payable | Unearned Income | First record of column 'aa' (Nonrecourse Debt Balance) |
| Clearing | Cash | Total of column 'c' (Depreciation Expense) - First record of column 'aa' (Nonrecourse Debt Balance) |
| Accounts Payable | Clearing | Total of column 'c' (Depreciation Expense) - First record of column 'aa' (Nonrecourse Debt Balance) |
| Contract Receivable | Unearned Income | Total of column 'h' (Rental Cash) |
| Unearned Income | Contract Receivable | Total of column 'i' (Debt Service) |
| Contract Receivable | Staged Equity Payable | Total of negative amounts from column 'z' (Free Cash) |
| Unearned Income | IDC (offset) | Total of column 's' (Book IDC (runoff)) |
| Unearned Income | Commission Fees Payable | Total of column 'e' (Amortization and Other Expenses) |
| Unguaranteed Residual - Leveraged | Unearned Income | First record of column 'o' (Residual Receivable) |
| Unearned Income | Inventory | Total of column 'c' (Depreciation Expense) |
| Lease Payments Receivable | Contract Receivable | First record of column 'z' (Free Cash), if > 0 |
| Debit | Credit | Amount |
|---|---|---|
| Unearned Income | Lessor Income - Leveraged | column 'q' (Pretax Income) record for appropriate month |
| Lease Payments Receivable | Contract Receivable | column 'z' (Free Cash) record, if > 0, for appropriate month |
Although Book and Tax IDC amortize each month, LeasePak makes no general ledger updates.
When loading a new table using Load Leveraged Table [U0228], LeasePak subtracts the old table amounts from the new table amounts. If the result is positive, the program performs the listed transactions. If the result is negative, LeasePak switches the debit/credit pairs, performing the transaction in reverse.
| Debit | Credit | Amount |
|---|---|---|
| Lessor Income - Leveraged | Unearned Income | Difference between old and new tables on: column 'l' (Unearned Income) - column 'n' (Deferred Book IDC (unamortized)) |
| Debit | Credit | Amount |
|---|---|---|
| Lessor Income - Leveraged | Unearned Income | Difference between old and new tables on: column 'l' (Unearned Income) - column 'n' (Deferred Book IDC (unamortized)) |
| Debit | Credit | Amount |
|---|---|---|
| Contract Receivable | Lessor Income - Leveraged | Difference between old and new tables on: column 'l' (Unearned Income) - column 'n' (Deferred Book IDC (unamortized)) |
| Lessor Income - Leveraged | Commission Fees Payable | Difference between old and new tables on: column 'e' (Amortization and Other Expenses) |
| Contract Receivable | Lessor Income - Leveraged | Difference between old and new tables on: column 'z' (Free Cash) |
| Debit | Credit | Amount |
|---|---|---|
| Cash | Clearing | Cash received |
| Clearing | Unguaranteed Residual - Leveraged | Difference between old and new tables on: column 'o' (Residual Receivable) |
| Clearing | Contract Receivable | Difference between old and new tables on: column 'k' (Net Rent Receivable) |
| Unearned Income | Clearing | Difference between old and new tables on: column 'l' (Unearned Income) - column 'n' (Deferred Book IDC (unamortized)) |
| Clearing | Gain on Sale | (Cash received + diff 'o') - (diff 'k' - diff('l' - 'n')) where diff stands for 'difference between old and new tables and columns are: 'k' Net Rent Receivable 'l' Unearned Income 'n' Deferred Book IDC (unamortized) 'o' Residual Receivable |
| Debit | Credit | Amount |
|---|---|---|
| Cash | Clearing | Cash received |
| Clearing | Unguaranteed Residual - Leveraged | First record of column 'o' (Residual Receivable) |
| Clearing | Contract Receivable | Unaccrued, positive amounts from column 'z' (Free Cash) |
| Unearned Income | Clearing | Unaccrued amounts from column 'q' (Pretax Income) |
| Commission Fees Payable | Clearing | Undisbursed amount of Broker Fees |
| Staged Equity Payable | Clearing | Undisbursed amount of Staged Equity |
| Clearing | Gain on Sale | Cash received + unaccrued amounts from column 'z' (Free Cash) - unaccrued amounts from column 'q' (Pretax Income) - first record of column 'o' (Residual Receivable) - Debt Principal Balance - Debt Additional Interest - Debt Penalty + undisbursed amount of Broker Fees + undisbursed Staged Equity |
| Clearing | Unamortized ITC | Amount from Lease (rls) record |
| Suspended Income | Clearing | Amount from Lease (rls) record |
| Clearing | Lease Payments Receivable | Amount from Lease (rls) record |
| Suspended ITC | Clearing | Amount from Lease (rls) record |
Amounts not specified as coming from leveraged table columns come from the Lease (rls) record.
Leveraged leases (like all leases) use the LeasePak Client updates to maintain information on the various parties to a lease. These updates include:
User Defined Client [U0229], in conjunction with Custom Code [U0722], allows you to establish additional LeasePak Client types, useful for describing the roles of people or entities attached to a leveraged lease.
After establishing the various clients needed for a lease, you can associate them with the application prior to booking, as well as modify the client information and lease/client associations throughout the life of the lease.
Within Application Tracking, enter the application and application asset using
More information on this process is in the next section, Booking a Leveraged Lease.
Use the following to add the asset to Inventory and book the lease:
Regular (long form) Add Asset and Book Lease are not available for leveraged leases. To disburse a payable not handled during booking, or to reverse an amount already disbursed, use
If you need to delete a newly booked asset and lease, use Remove Lease (Delete Asset is not available, but for leveraged leases, Remove Lease also deletes the associated asset).
The following updates are available for leveraged lease operational processes:
For other Daily Work updates, MSI either does not recommend them or they are not allowed for leveraged leases. Specifically, you cannot use the following mid-term adjustment and end-of-term updates:
LeasePak processes mid-term adjustments for leveraged leases using the Load Leveraged Table [U0228] update. This update uses a leveraged lease input file to adjust the financial model of the lease stored in the rli table, as well as the associated lease record, asset record, and general ledger amounts. For more information, refer to the document Load Leveraged Table [U0228].
Use the Master Financial [U0202] update as you would for other types of leases, except that only fields not controlled by input from the rli table are accessible.
Like the Master Financial, Asset [U0210] fields controlled by the input from the rli table are not accessible.
Only the Payoff [U0103] options Payoff and Payoff Reversal are available to close out leveraged leases. Before performing a payoff, you must first disburse any remaining Broker Fees or Staged Equity payables using New Lease [U0101]: Disburse Check.
Payoffs must use the method 'INV'. Three payoff fields, Debt Prn Bal, Debt Addl Int, and Debt Penalty allow you to enter amounts that LeasePak adds to the Total Recd.
For more information about payoff general ledger transactions, refer to the above table, Payoff [U0103]: Payoff. For more information on the Payoff/Payoff reversal options, refer to the document ../../updates/u0103_payoff/u0103_payoff.htm.
For more information on creating leveraged lease input files, contact your NetSol representative.
For a full description of Application and Application Asset (pending asset) entry fields, refer to the documents Application Tracking [U08]: Application Tabs and Application Tracking [U08]: Asset Tabs
.
LeasePak displays the Load Leveraged Table file browse box:
For each Application and Application Asset tab, the following describes fields affected by the leveraged lease input file, fields disabled for leveraged lease applications, and additional fields the user must fill in to meet LeasePak minimum book requirements. Fields not included on the lists are input optional (you can require input for these fields to meet your business needs).
Fields are the same as for other lease types.
Cash Control users: Check Num also required FASB 13 Test: attempting to click Test
while in a leveraged lease application will cause an error and terminate LeasePak.Fields are the same as for other lease types.
For leveraged leases, LeasePak disables the entire tab (no fields required).
For leveraged leases, LeasePak disables the entire tab (no fields required).
For leveraged leases, LeasePak disables the entire tab (no fields required).
The following table summarizes the flow from the leveraged lease input file to the Application and Application Asset fields.
| Column | Data | Location | Field Name | Notes |
|---|---|---|---|---|
| a | Activity Month (format MM/DD/YYYY) | Application Tab 3 | Term | Date range between first and last record of column 'a' |
| a | Activity Month (format MM/DD/YYYY) | Application Tab 3 | Commencement Date | Month/year from first record of column 'a', day from user input Payment Due Day |
| a | Activity Month (format MM/DD/YYYY) | Application Tab 3 | Leveraged Commencement | Must be on or after Commencement Date |
| a | Activity Month (format MM/DD/YYYY) | App Asset Tab 2 | Acquisition Date | Same as Commencement Date |
| a | Activity Month (format MM/DD/YYYY) | App Asset Tab 2 | In-service Date | Same as Commencement Date |
| a | Activity Month (format MM/DD/YYYY) | App Asset Tab 6 | Book Depr Date | Same as Commencement Date |
| b | Rent, Residual and Other Income | |||
| c | Depreciation Expense | Application Tab 4 | Acquisition Cost | Sum of column 'c' |
| c | Depreciation Expense | App Asset Tab 1 | Acquisition Cost | Sum of column 'c' |
| c | Depreciation Expense | App Asset Tab 6 | Federal Depreciation | Regardless of the method selected for reporting purposes, LeasePak uses the appropriate month's amount from column 'c' to calculate federal depreciation |
| c | Depreciation Expense | App Asset Tab 6 | State Depreciation | Same as federal depreciation |
| c | Depreciation Expense | App Asset Tab 6 | Tax Depreciation Basis | Sum of column 'c' |
| d | Interest on Loan | |||
| e | Amortization and Other Expenses | Application Tab 6 | Broker Fee | Sum of column 'e' |
| f | Tax IDC (runoff) | Application Tab 6 | Tax IDC | Sum of column 'f' |
| g | Taxable Income | |||
| h | Rental Cash | |||
| i | Debt Service | |||
| j | Other Cash | |||
| k | Net Rent Receivable | |||
| l | Unearned Income | |||
| m | Deferred Tax ITC (unamortized) | App Asset Tab 5 | ITC Method | If ITC Method is 'LEVL', LeasePak amortizes Book ITC using column 't'; the first records of both columns 'm' and 't' must be > 0 for the user to set ITC Method to 'LEVL' |
| n | Deferred Book IDC (unamortized) | |||
| o | Residual Receivable | Application Tab 4 | Residual Amount | Amount from first record of column 'o' |
| o | Residual Receivable | App Asset Tab 1 | Residual Amount | Same as Application Tab 4 |
| p | Deferred Taxes | |||
| q | Pretax Income | |||
| r | Tax Effect of Pretax Income | |||
| s | Book IDC (runoff) | Application Tab 6 | Book IDC | Sum of column 's' |
| t | Book ITC (runoff) | App Asset Tab 5 | ITC Method | If ITC Method is 'LEVL', LeasePak amortizes Book ITC using column 't'; the first records of both columns 'm' and 't' must be > 0 for the user to set ITC Method to 'LEVL' |
| u | FSC Exclusion | |||
| v | Subpart F Income | |||
| w | Parent Income | |||
| x | AMT Depreciation | App Asset Tab 6 | Alt Min Tax Depreciation | Regardless of the method selected for reporting purposes, LeasePak uses the appropriate month's amount from column 'x' to calculate AMT depreciation |
| y | Depreciation Preference | |||
| z | Free Cash | Application Tab 6 | Staged Equity | Sum of negative amounts from column 'z' (displayed as positive amount) |
| z | Free Cash | Application Tab 8 | Payments (table) | Positive amounts listed as 'MON' payments, 0 amounts listed as 'SKIP', negative amounts listed as 0/'SKIP' (with actual amounts listed in Staged Equity) |
| z | Free Cash | Application Tab 8 | Staged Equity (table) | List of negative amounts from column 'z' (displayed as positive amounts) with corresponding dates from column 'a' |
| z | Free Cash | Application Tab 9 | Lessor Accrual Method | If first record from column 'z' > 0, set to 'ALVR'; otherwise, set to 'RLVR' |
| aa | Nonrecourse Debt Balance |
When you load the leveraged table, add additional input, and save the application, LeasePak 'locks' the application (but not the application asset) information. To make changes to the application after you have saved it
and reload the appropriate leveraged table. This
'reopens' the application.
Booking is similar to other lease types. Use the following to add the asset into Inventory and book the lease:
Although a leveraged leases uses an external input file to supply a precomputed financial model, LeasePak takes the amounts from the rli table and transfers them to the general ledger, so most LeasePak reports will work as well for leveraged leases as they do for other types.
If you book leveraged leases separately, either in a portfolio separate from your other types of business or in a separate company/region/office, you can select many of LeasePak's reports based on this criteria and produce reports for leveraged leases only.
For more information on reports, refer to individual report documentation. For more information on reports used in general ledger reconciliation, refer to Reconciliation Procedures in the document General Ledger Accounting.
This report features the following columns especially for leveraged leases: deferred taxes, FSC exclusion, interest expense, and taxable income specifically for leveraged leases.
LeasePak 6.0b Documentation Suite
©
2008 by NetSol Technologies Inc. All rights reserved.
The information contained in this document is the property of NetSol Technologies Inc. Use of the information contained herein is restricted. Conditions of use are subject to change without notice. NetSol Technologies Inc. assumes no liability for any inaccuracy that may appear in this document; the contents of this document do not constitute a promise or warranty. The software described in this document is furnished under license and may be used or copied only in accordance with the terms of said license. Unauthorized use, alteration, or reproduction of this document without the written consent of NetSol Technologies Inc. is prohibited.