Asset leasing conventions
This article describes conventions for leased assets. Leasing conventions are used to determine the commencement date of a lease book. If the leasing convention is set to None, the commencement date is the same as the start date for the lease (that is, the value of the Lease start date field). If the leasing convention is set to Full month, the commencement date is the first day of the month that the lease's start date falls in.
The commencement date determines the start date of the period for the liability amortization and asset depreciation schedules. Interest expenses and depreciation expenses are posted on the period end date of the corresponding schedules. The initial recognition and adjustment journal entry are posted on the commencement date.
Leasing conventions are assigned to the setup for a lease asset book.
To view or assign the leasing convention, follow these steps.
Go to Asset leasing > Setup > Lease books.
In the Leasing convention field, select one of the following values.
Leasing convention Description None The liability amortization and asset depreciation schedules start on the lease's start date, because the commencement date equals the lease's start date. The end date is one month later. This leasing convention doesn't guarantee that the interest will be posted on the last day of each month. Full month For leases that have a start date that occurs at any time during the month, the liability amortization and asset depreciation schedules start to accrue expenses on the first day of that month. This leasing convention ensures that interest is accrued on the last day of each month for the whole month. Select Save.
When a lease is created, the commencement date of each book is automatically entered based on the start date that is entered for the lease and the leasing convention that is specified for the book.