Classification 

Use

Classification of financing is a step performed during the processing of leases. The system determines which class the financing belongs to and how a financing transaction is to be mapped in accounting.

A classification in the Lease Accounting Engine is performed for all processes apart from terminating processes.   

Prerequisites

You have made the following settings in the SAP Customizing Implementation Guide (IMG):

●     Accounting principles

○     Financial Accounting ®  Lease Accounting ®  Basic Settings:
 ®  Define Accounting Principles
 ®  Assign Accounting Principles to Company Code

○     Financial Accounting ®  Lease Accounting ®  Specifications for Controlling Processing -> Financing Classification:
 ®  Define Accounting Principles for Classification in the SAP CRM System

●     Classifications and access keys (substitution)

○     Financial Accounting ®  Lease Accounting ®  Specifications for Controlling Processing ® Financing Classification  ®  Define Classifications and Access Keys

●     Validation rules and check sequences

○     Financial Accounting ® Lease Accounting ®  Specifications for Controlling Processing ® Financing Classification:
® Define Validation Rules
® Specify and Assign Check Sequences

○           ®  Specify Value Transfer in Basis Structure for Classification
      ® Define Derivation of Check Sequences

●     Fill structure fields

 

Features

In the case of inception or a change process, classification uses the leasing parameters defined in the contract to determine which accounting principles (ledgers: local GAAP (e.g. German Commercial Code), IAS, U.S. GAAP) are to be applied to the postings.

The accounting principles must be stored in Customizing in both mySAP CRM and mySAP ERP.

 

Classification in the Lease Accounting Engine is carried out for the following processes, for example:

●     New lease (NEWL):
A new contract is created in mySAP CRM.
For operating leases, the Lease Accounting Engine capitalizes the asset in the lessor’s asset management system. The corresponding accrual postings are triggered at the same time, generated by the Accrual Engine, and posted in the general ledger.
For capital leases, asset acquisition postings are not generated, and only the accrual postings are triggered and posted in the general ledger.

●     Base lease extension (BLEX) or restructuring (REST):
The original lease continues with a follow-on contract or follow-on contract item. In mySAP CRM, the old contract is ended and a new contract or contract item is created. The new contract or contract item is classified. The old asset is decapitalized.
For operating leases, the old asset is decapitalized in asset management and a new asset is created with the appropriate values. In addition, any accrual postings that have not been released yet are cleared and then posted again.
For capital leases, only the accruals are posted.

 

●     Contract termination at the end of the contract term (TERM) or earlier (ETER):
Classification is not carried out in processes that terminate a contract. Existing assets and accruals are cleared.
In addition, depending on the entries in Customizing, one-time postings are made in the general ledger for each accounting principle.

 

Activities

The CRM system uses the CRM interface to transfer the contract data to the system containing the Lease Accounting Engine.

The contracts are classified on the basis of various parameters such as the accounting principle, useful life of the asset, and contract term.

The Lease Accounting Engine first determines which validation rule or check sequence is to be used to determine the classification.

Depending on the Customizing settings, it evaluates either individual validation rules or a check sequence of several rules. The system processes the check steps of a check sequence one after the other until it determines a classification. The result is linked with the validation rule or check sequence as per the principle of substitution (access key).

Depending on the result of the classification, the Lease Accounting Engine triggers the asset posting and one-time postings in the general ledger and the accrual postings.

 

For more information on the principle of substitution, see Validation, Substitution, and Rules.

 

Example

Based on the legal rulings and directives, checks are defined in Customizing that the system carries out in a predefined sequence.

 

Criteria for capital lease:

●     Net present value test

●     Term test

●     Test for low-cost purchase option

 

Criteria for operating lease:

The criteria for capital lease are not fulfilled.