IFRS Leases
Purpose
The spreading of commission and fees for each lease can be done on either a straight line or actuarial basis
If the Unearned Interest method selected on the lease account type is No Deferral, then the commission and fee spread will be straight line no matter which option is selected
The distribution of the commission and fees can be viewed on the Lease Unexpired Dealer Commission Report and the Lease Unearned Fees Report
The Lease Dealer Unexpired Commission report will show:
- the Lease start date
- the Lease final instalment date
- the term of the Lease in days – used for the straight line calculation
- the original amount of commission paid on each account
- the unexpired commission at the start of the month
- commission on accounts added during the month
- the unexpired commission at the end of the month – this will be reconciled to a General Ledger account code
- commission accrued
- the amount of commission expensed in the month
The Lease Unearned Fees Report will show, for each type of fee:
- the Lease start date
- the Lease final instalment date
- the term of the Lease in days - used for the straight line calculation
- the original amount of fees earned
- the unearned fee at the start of the month
- fees on accounts added during the month
- the unearned fees at the end of the month – this will be reconciled to a General Ledger code balance
- commission accrued
- the amount of fees earned in the month
There will be a separate section on the report for each fee for each account type
If there are multiple fees and/or multiple account types there will be a number of report sub-totals, each of which needs to be reconciled to its unique General Ledger code
The Lease System month end reset routine will:
- post a journal entry between the GL Balance Sheet Unexpired Commission Expense account and the Profit and Loss Commission Expense account
- post a separate journal entry for each financed fee between the GL Balance Sheet Unearned Fee accounts and the Profit and Loss Fee Income Earned account(s)
Access
- Accounts | Edit/View Account Types
Dialog Details
If a Lease System Account Type has no accounts that have commission or fees associated with them, then the set up procedures described below do not need to be applied to those account types
These procedures MUST be applied to every Lease System Account Type that has any associated accounts that may have dealer commission or financed fees posted to them
There is an 
button on each Lease System Account Type that needs to be set up for the dealer commission expense and fee income spread to take place
This will be completed as follows:
Unexpired Commission Setup
Details Specific Fields
| Field | Explanation |
| Unexpired Dealer Commission – Balance Sheet | This is a new Balance Sheet GL Code that must be created and selected into this field It will be set up with a General Ledger Type of Current Asset or Balance Sheet Accounts Current – For Reconciliation This GL account must be unique for each Lease System Account Type [F2] in this field to display the General Ledger Browse |
| Dealer Commission Expense – Profit and Loss | Either a new Profit and Loss GL Code can be created for this Direct Expense item and selected into this field, or an existing GL Code that the dealer commission currently posts to can be selected into this field [F2] in this field to display the General Ledger Browse |
| Commission and Fees Realised Method | Select from here the method required to spread dealer commissions and fees Both will be spread in the same way for an account type The options are:
The calculation method selected will determine how fees and commission will be spread on the print out and in determining the calculation applied to the month end column on the relevant report Note – If the Unearned Interest recognition method on the Lease Account Type is set to be No Deferral, the system will only calculate a straight line allocation of commission or fees, no matter what is selected at this option |
Fee Income Spread Setup
On
any Lease Account it is possible that there will be more than one fee item that
needs to be spread. The second half of
this set up dialog allows the association of as many lease financial fee items
as required.
Details Specific Fields
Field | Explanation |
Code | Enter a code for the fee item that is to be spread For consistency it would be a good idea to use the same code as is used on the transaction type set up for this fee |
| Description | Enter a description for the fee item that is to be spread For consistency it would be a good idea to use the same description as is used on the transaction type set up for this fee |
Financed Income Transaction Type | Select here the Transaction Type that is used to process this fee on the variable loan account The transaction type can be ascertained from the Lease Control Details |
Financed Income Profit and Loss GL Code | This may be the existing General Ledger account used for this purpose, or a new account can be established [F2] in this field to display the General Ledger Browse |
Financed Income Balance Sheet Code | A new account will need to be established [F2] in this field to display the General Ledger Browse |
Note: A separate fee income details screen will need to be completed for each financed fee associated with the lease account.
Each setup must post to a unique balance sheet GL Code. If there are multiple account types in use, each account type that has financed fee accounts associated with it must have a fee income details screen set up for each fee and that must post to a unique balance sheet GL Code.
The same profit and loss GL Code may be used unless there is a requirement to see the fee income split.
General Ledger Implications
Month End Processing
During each month end the system will process journal entries that will:
- Force the balance sheet unexpired dealer commission expense balance to be the same as the unexpired dealer commission month end total from the Lease Unexpired Commission Report. The other side of the entry will post to the profit and loss General Ledger account for dealer commission expense.
- Force the balance sheet unearned fee income balance to be the same as the unearned fee income month end total from the Lease Unearned Fees Report. The other side of the entry will post to the profit and loss General Ledger account for fee income. There will be a separate General Ledger Journal for each fee income transaction type nominated on the
If you have multiple account types set up for lease income and commission IFRS spread, separate General Ledger Journals will be posted for each Account Type.
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