Prior to IFRS enhancement in property manager, though we did have an option to capture the options that a tenant or landlord can exercise during the lease life, it did not have any impact on any of the calculations.
However post IFRS enhancement, the options tab has been enhanced and users can capture the options, which are certain to be exercised from a tenant’s perspective during Termination, Purchase, Renewal or Residual options etc and the same will be included in the ROU / Liability calculations. Like normal payment terms even for options we can enable compliance related check boxes like ROU / Liability/ report from Inception / Inter Company check boxes can be checked even at options level.
As options has a financial impact going forward, we need to keep in mind that
- Options can be added only via Amendment going forward
- Options can also be extended / terminated via amendment and system will recalculate the ROU / Liability balances due to Options Amendment / termination.
- All calculations during amendment of Options like ROU,Liability, etc including lease expense will start from Amendment start date
- Schedule and items program will not be triggered when only an option is added / amended. But if a schedule and items program is triggered as a part of Payment term amendment for a lease which has options, the program output has been enhanced to capture the options details as well
- Options will also be part of period end accrual balances and Interest Expense and amortization expense will be derived for Liability and ROU considering option amounts.
- Amortizations and interest expense for options are calculated till option termination date. The amortizations/interest are not restricted to the lease termination date.
For more information on this enhanced option functionality, refer document 2432815.1