SAP Note

2544232 - Leasing: Handling transition scenarios

Component: RE-FX-LA (Lease Accounting), Version: 21, Released On: 23.03.2023

Symptom
New IASB and FASB leasing standard for the handling of leasing contracts (IFRS 16 and US-GAAP ASC 842)

Other Terms
SAP contract, IFRS 16, US-GAAP ASC 842, leasing, right of use, leasing liability, interest and repayment, contract valuation,
IFRS, US-GAAP, RE-FX, real estate, property, transition

Reason and Prerequisites

This SAP Note describes the functional supports available for handling the transition to the new leasing standards in
accordance with IFRS and US-GAAP. For information about the basic functions, see SAP Note 2255555.
This SAP Note describes functional options only. It does not provide any recommendations in relation to legal (customer-
specific) processing. These must be agreed upon with the relevant auditors.
Note that the functions listed here are available only with the option "Integration into Asset Accounting".
You can also use the existing BAPIs for mass execution of some of the steps listed below.

Solution
Scenario 1: Transferring finance leases that existed prior to the date of application
In this scenario, you want to transfer any finance leases that existed prior to the date of application to the new leasing
standard.
To link assets and asset values (APC, cumulative depreciation, and the net book value) to an RE-FX contract, proceed as
follows:
1. Use the asset transfer to transfer the previous assets to a new RoU asset. The reference date of the asset transfer must
be the same as the reference date of the first posting in the master data of the new asset (initial acquisition on). Make
sure that the new assets have the correct depreciation key (SAP Note 2297363).
2. In the RE-FX contract, do not use the "First Posting" function. Furthermore, set the relevant date of application as the
start of valuation. Make sure that the valuation start date and the reference date of the asset transfer are the same.
3. For the contract, maintain the new "Net Worth Value Specified (Legacy Data)" condition (see SAP Note 2536673) with
the net book value of the transferred finance lease asset. Ensure that the "Net Worth Value Specified (Legacy Data)"
condition (and therefore also the net book value of the new asset) and the initial start of consideration have the same
date. To transfer assets without a current net book value (Net Book Value=0), see SAP Note 3044711.
4. If the contract is a foreign currency contract, you can use the BAdI BADI_RECA_CURRENCY_TRANSLATION to adjust
the exchange rate (see also SAP Note 2474141).
5. Manually assign the new RoU asset from step 1 to the valuation rule.
6. As part of the opening entry, the cash flow item for asset acquisition (debit asset and credit asset clearing) is
automatically set to "Posted" without generating an FI document. An RE document containing, for example, exchange
rate information is generated. The posting for setting up the leasing liability (debit asset clearing and credit leasing
liability) is an actual posting (see the attachments to SAP Note 2255555, which contain posting examples).
7. The old leasing liability must be written off manually (for example, against asset clearing).

Integration between the contract and the RoU asset is therefore established and future posting changes are integrated.
Please note that, in this scenario, the new RoU asset must contain your historical acquisition and
production costs (APC) and accumulated depreciation values for each document posting. The migration of
legacy data (for example, using AS91) is not supported in Asset Accounting in SAP ERP 6.0 and Financials
Extension. In S/4 HANA, you can use migrated asset values (see SAP Note 2884487).
SAP Note 3263041 describes the possible procedure for the migration within payment periods.
Scenario 2: Retrospective approach with the transfer of external values (no calculation of RoU in RE-FX)
In this scenario, the asset values the are relevant on the date of application (APC on the contract start date, cumulative
depreciation, and the book value on the date of application) are calculated outside of SAP RE-FX.
On the date of application, you want these values to be transferred to the contract and asset. To do this, proceed in the same
way as for scenario 1. The only difference here is that you do not need to use the asset transfer to post the assets. Post a gross
acquisition instead.
Please note that, in this scenario, the new RoU asset must contain your historical acquisition and
production costs (APC) and accumulated depreciation values for each document posting. The migration of
legacy data (for example, using AS91) is not supported in Asset Accounting in SAP ERP 6.0 and Financials
Extension. In S/4 HANA, you can use migrated asset values (see SAP Note 2884487).
Scenario 3: Retrospective approach fully in RE-FX
In this scenario, the contracts, including all changes, are fully entered historically in RE-FX. For the initial valuation, only one
time slice of the relevant valuation rule can be entered. All historical contract changes are considered linearized in the
calculation over the entire term before the date of application.
Proceed as follows:
1. Enter the contract, including all data and all changes (for example, condition time slots).
2. Generate the relevant valuation rules with the start of valuation as the contract start date and the first posting with the
date of application.
3. When the valuation rule is released, the RoU asset is generated. Two cash flow versions are also generated for the
valuation rule:
1. An informational cash flow with the flows (and stocks) prior to the date of application (linearized calculation)
2. A cash flow as of the date of application with planned items (including opening entries)
3. If the contract is a foreign currency contract, you can use the BAdI BADI_RECA_CURRENCY_TRANSLATION to
adjust the exchange rate (see also SAP Note 2474141).
Note that, in this scenario, the RoU asset does not have any historical APC or cumulative depreciation prior to the date of
application.
Before the date of the first posting, it is not possible to use any conditions with the following classifications: Sublet,
unplanned depreciation, present value specified, net worth value specified and asset retirement obligation. Functions for
these classifications are therefore only supported as of the date of the first posting.

Scenario 4: Start on the date of application with an "actual" RoU specification

In this scenario, you start on the date of application but you specify the RoU amount (and do not calculate it in RE-FX).
Proceed as follows:
1. Enter the contract, including all data, on the date of application.
2. Generate the relevant valuation rules. Do not use the "First Posting" function. Furthermore, set the relevant date of
application as the start of valuation.
3. Maintain a "Net Worth Val. Spec." condition for the contract.
4. If the contract is a foreign currency contract, you can use the BAdI BADI_RECA_CURRENCY_TRANSLATION to adjust
the exchange rate (see also SAP Note 2474141).
5. When the valuation rule is released, the RoU asset is generated. The required cash flows (RoU receipt with the net worth
value specified, owner financing differences, and so on) are also generated.
Note that, in this scenario, the RoU asset does not have any historical APC or cumulative depreciation prior to the date of
application.

Scenario 5: Implementation of RE-FX following first application of IFRS 16/US-GAAP 842

In this scenario, RoU assets and leasing liabilities were created and posted outside of SAP RE-FX on the date of application
(for example, using a different software solution or manually) and you now want to retroactively switch to SAP RE-FX.
Proceed in the same way as for scenario 1. When you do this, note the following points:
1. In this scenario, you must also create a new asset with the correct depreciation key.
2. The old leasing liability must be written off manually (for example, against asset clearing).
Consequently, integration between the contract and the RoU asset is established and future posting changes are integrated.
Please note that, in this scenario, the new RoU asset must contain your historical acquisition and
production costs (APC) and accumulated depreciation values for each document posting. The migration of
legacy data (for example, by AS91) in Asset Accounting in SAP ERP 6.0 and Financials Extension is not
supported. In S/4 HANA, you can use migrated asset values (see SAP Note 2884487).

Scenario 6: Pro forma restatement

In this scenario, calculations and valuations are performed in accordance with IFRS 16 and/or US-GAAP 842. This is done in
parallel to the existing standard. This calculation is for information purposes only.
To do this, proceed as follows:
1. Implement SAP Notes 2530364 and 2536673.
2. Implement an additional valuation rule and set the "Informational" indicator in Customizing for the valuation rule.
3. Now, this valuation rule does not have any influence on the current contract or other valuation rules (for example, object
cash flow, postings, and so on).
4. You can use the normal posting transaction RECEEP to set the cash flow records from this informational valuation rule
to "Posted". (In this case, only a RE document is generated, no FI document.)

General Remark
Note that it is not possible to use the condition valuation property 'Net Worth Value Specified' or 'Net Worth Value Specified
(Legacy Data)' in connection with a balance-sheet valuation rule of the classification B 'Straight-Line Lease (Linearized
Commitment)'. The special way in which the depreciation is calculated for valuation classification B prohibits the use of a
predefined asset because the leasing costs (total of the payments) are offset over the leasing term on a linear basis.

This document refers to

SAP Note/KBA Component Title

3263041 RE-FX-LA-CF Migration within payment periods for linear interest calculation

2536673 RE-FX-LA RE-FX: Leasing - corrections and function enhancements

2530364 RE-FX-LA RE-FX: Leasing - corrections and function enhancements

2297363 RE-FX-LA RE-FX: Leasing - enhancement to Asset Accounting

2255555 RE-FX-LA Valuation of leasing contracts (SAP Contract and Lease Management based on SAP RE-FX)

This document is referenced by

SAP Note/KBA Component Title

3044517 Error message RECETM272 is raised when updating a contract

2662137 RE-FX-LA SAP Contract and Lease Management (SAP RE-FX) - FAQ note

3044711 RE-FX-LA RE-FX: Leasing - Net worth value of ZERO in first time slot for valuation rule

3001699 RE-FX-LA-AA RE-FX Leasing, Check for Handling of Migrated Asset