6. Upload contracts using the excel template
To collect all data and get consistent input, the excel template is used to collect data.
You’ll find user guidance in the template (Separate sheet). The input will be organized for individual groups to process.
The metadata is defined in the spreadsheet. When you complete these, they’ll be available in the drop-down menu.
The rows marked in red are mandatory. There’s a user guidance in a separate sheet described below:
Title
In the calculation model, this is the name that identifies the contract and can only be about 20 characters long. If the name is longer, the last characters are deleted. For example, avoid writing a “rent”, “lease” at the beginning, but write instead, “Storgata 20, Parkveien 3”, etc. It’s unnecessary to write the department- or the company name as they are registered separately.
Discount rate
The Discount rate category can be entered by selecting among the categories that you’ve defined under the Metadata sheet. Categories of discount rates can be based on geography, rental period and underlying asset. Please note that the Discount rate are normally not changed during the lease term unless there is a change in the lease.
Pre-paid or post-paid lease payments
This will follow the payment pattern. Pre-paid payments are used for contracts (Most contracts) where payments are made in advance, and post-paid payments are used for contracts where the payments are at the end of the period. For pre-payments leases, interest will be calculated at the beginning of each period. The last period will therefore have no interest.
Does the lease payment occur at the end of the previous month?
Answer Yes if the payment is actually made during the month before the lease period. The same way the payment for the first quarter is made in December the year before. This will shift the interest and depreciations to the following month, but reduces the lease liability in the month the payment is made. The lease period is set to the period that the lease payment covers. For example, the lease payment for a new lease from January to March is paid in December. The start date of the lease period should be January 1, and by answering Yes to the question, the instalment is made in December.
Use daily rates?
This function is used for payments that is based on daily rates and the periodic payments depend on the number of days in the month.
Information measuring the right-of-use asset
These fields are used to enter a correction of the value of the ROU asset. This will normally not be relevant in connection to the implementation of IFRS 16, as this results in a capitalization with subsequent expense of previously recognized costs. For contracts entered after January 1st 2019, these costs described in IFRS 16.24 are required to be capitalized.
Asset removal obligation: Entering values here is added to the value of the right of use asset and should be the discounted value. The costs of dismantling and removing the item and restoring the site on which it’s located must therefore be adjusted for inflation until this time. Be aware that this is not a new provision under IFRS 16, but a coordination with the provisions of IAS 16.16 (c).
Impairment of ROU asset and Other adjustments of ROU assets
These options are also available under log lease changes and will affect the value of the ROU asset the date of the change. An example is, an impairment of the ROU assets during the lease period that needs to be registered here or other changes, like a partial reduction of the ROU asset, due to modifications of the lease term.
Lease Payments
There are several elements that need to be considered:
What is the payment for the rental elements? It’s not necessarily the amount stated in the lease contract or what’s paid on the last invoice. Payment to the lessor may also include more than the actual rental element, such as property tax, lessor administration costs and insurance. In these cases, the payment will be divided between rent and non-rent elements.
What is variable and fixed rent? It’s only the fixed rent that shall be included in the lease obligation. For example, revenue -based rent is not included, but a guaranteed minimum rent will be a fixed rent.
Is there an identified asset? A lease can be part of a service agreement. See guidance in IFRS 16 B9-B39 identify a lease.
The length of the lease.Understanding the length of the lease may have a significant impact on the liability and the ROU asset in the balance sheet. Examples are options for renewal or a right to termination before expiration of the agreement. In these cases, the lessee must assess the period to be included in the calculation.
Non-lease components. The lessee may choose to include non-rental non-lease in measuring the lease liability. Our experience, however, is that for property rentals, non-lease elements and coverage of landlord activities and expenses will often be variable. This is why they’re not included in the minimum lease payment.
Option to extend lease period?
We recommend that all options to extend is included for overview. It also allows for the option to be included at a later time, if currently it’s not reasonably certain that the option will be exercised. To exercise an option previously not included, the log lease change functions need to be used. (There’s no benefit to include options for extension. This only increases the lease liability and the ROU asset without affecting depreciation significantly).
Date of termination
This field is not required for implementation. Leases that are terminated will not normally be included (If the remaining rental period is less than 12 months). If a terminated lease shall be included in the calculation, the End date of lease payment define the period for the lease. A lease that’s terminated after implementation of the standard, use the termination function under Log other change.
Notification Dates
There are several notification dates in the solution that we recommend using as a reminder, when an option for extension or purchase of underlying asset is to be exercised or when a termination right may be reversed. The date to be used is usually before the date of exercise of the option. The notification will appear on the front page.
The first index regulation that should be noted is regulation after January 1st 2019. Remember that the index regulation on January 1st 2019 will be included in the minimum lease payment.
After the contracts have been uploaded in SharePoint, based on the template, the contract and the last invoice is recommended to be uploaded, for access, review and audit.
Please note that we have an integration with Power Automate in the 2021 version and refer to the separate Power Automate guidance. You will still have notification on the front page.