Asset leasing in Dynamics 365 Finance

10 mins read - By Craig Cornish - Senior Manager - ERP

In this article we provide an overview of how you to use Asset Leasing within Dynamics 365 Finance and Supply Chain Management. 

Introduction

Asset leasing in Dynamics 365 Finance and Supply Chain Management helps ensure your organisation is compliant with the FASB (Financial Accounting Standards Board) and IFRS 16 (International Financial Reporting Standards) accounting regulations, related to lease management and its financial impact. Asset leasing in Dynamics 365 Finance reduces manual errors and saves your users time through features such as:

• automatic lease status updates
• right of use assets
• wholistic monitoring and analytics
• calculations of net present value
• lease interest
• future cash payments requirements.

Asset leasing features in Dynamics 365 Finance

What can Asset Leasing solve in Dynamics 365?

Asset leasing in Dynamics 365 Finance and Supply Chain Management can help you:  

• Automate complex lease calculations of present value and subsequent processes such as future lease payment, lease liability amortization, right-of-use asset depreciation, and expense schedules.
• Automatically classify the lease as either operating or finance, and as a short-term lease or low-value lease. The lease classification tests include transfer of ownership, purchase option, lease term, present value, and unique asset.
• Centralise the management of lease information, such as important dates, including commencement and expiration dates, lease transaction currency, payment amounts and frequency.
• Generate accounting entries for initial recognition, and subsequent measurement of the lease liability and right-of-use asset.
• Provide posting to various layers to accommodate different reporting purposes, such as tax reports. Comply with accounting standard requirements to represent leases on a balance sheet by using the Balance sheet impact calculator.
• Provide audit controls over the integrity of the lease data to ensure posted transactions match the calculated amounts of the present value, future payments, and liability amortization.
• Easily import from or export to Excel for all lease data using data management.
• Prepare asset leasing reports, particularly disclosures and notes.
• Integrate with company chart of accounts, currencies, fixed assets, vendors, journals, data management, and number sequences.

The Asset Leasing Module in Dynamics 365

The module will support a full asset lifecycle, with integration to the fixed asset register if required:

Asset leasing elements in Dynamics 365 Finance

The below diagram shows the major elements of the business process for leases in Dynamics 365 Finance and Supply Chain Management.

Asset leasing components in Dynamics 365 Finance

Asset leasing maps out lease information, payment schedules, start and end dates, and the payment frequency. It also automates calculations for present value, monthly lease payments, interest, and lease amortisation. Dynamics 365 Finance performs lease classification tests, depending on the configuration. It also creates and posts the corresponding lease transactions, which are based on the framework defined by the accounting standard you are following.

The following diagram shows the lease book, the lease, calculated payment schedule, the classification tests for leases and lease books, and the corresponding accounting transactions.

Lease classification tests are also available and include defining; Transfer of ownership, Purchase option, Lease term, Present value, and unique asset. 

Conclusion 

Asset Leasing in Dynamics 365 Finance is a detailed and helpful tool for businesses. If your organisation has additional requirements to what is detailed in this article, feel free to reach out to myself or Veritec’s experienced ERP team and we can help you realise your potential. You can find out more information on our Enterprise Resource Planning solution page here.