Leasing

A lease agreement represents an agreement where a lessor gives the right to a lessee to use an asset during the lease term in exchange for contractual lease payments.

SAP Financial Services Data Management enables you to represent different lease types.

Financing Leasing

Leases of this category are long term, cannot be cancelled, and are fully amortizing. A finance lease may have a residual value as a purchase option at the end of the lease.

A lease is classified as a finance lease if it meets any of the following criteria:​

  • Title Transfer​

    The lease transfers ownership of the asset to the lessee by the end of the lease term.​

  • Bargain Purchase Option

    A bargain purchase option is a clause in a lease agreement that allows the lessee to purchase the leased asset at the end of the lease period at a price substantially below its fair market value.​

  • Contract Term​

    The lease term is equal to 75% or more of the estimated economic life of the leased asset.

  • Present Value​

    The present value at the beginning of the lease term of the minimum lease payments and residual value guaranteed by independent parties equals or exceed 90% of the fair market value of the asset at inception.​​

Operating Leasing

Leases of this category are short term and can be cancelled. The risk of obsolescence remains with the lessor, who is also responsible for maintenance, insurance, and repair costs. This type of lease is thus also known as a service lease.

Leveraged Leasing

This is a lease that is partially financed by the lessor through a third-party financial institution. The lending institution holds the title of the asset and the loan is serviced through the lease payments. The lessor collects the payments from the lessee. A leveraged lease does not involve the transfer of the title to the lessee during the lease period.

The following are important aspects of leasing:

Residual Value

The residual value is the estimated value of a fixed asset at the end of its lease term or useful life.

Leasing with a Sublease

This is a lease agreement between the original lessee and a new lessee. The new lessee enjoys the use of the asset for the duration of the sublease while the original lessee maintains the obligation to make the agreed payments and the right to buy the asset at the end of the contract.

Leasing Services

Sometimes the lessor assigns the operation, maintenance of the leased items, and administrative tasks from the leasing contract to a third party, usually a service company.

Data Model

Lease Agreement Diagram

This diagram enables you to represent leasing agreements. The following figure shows an example of how this can be represented in the conceptual data model (CDM). For the sake of simplicity, the diagram is shown here in two parts:

  • Lease Agreement

    This is an agreement where the lessor gives the right to the lessee to use an asset during the lease term in exchange for contractual lease payments.

    The following is an example of how a lease agreement can be modeled in the CDM:

    In the Financial Contract entity, you can use the Financial Contract Type attribute to specify whether you are modeling a financing or an operating lease.

    The following are some of the most important attributes of the Lease Agreement entity:

    • Is Sublease Allowed

      You can specify whether the original lessee is allowed to sub-let the asset to a new lessee, thereby creating a new lease agreement.

    • Security Deposit Currency

      This is the amount collected by the lessor from the lessee that can be used in case of any payment default, damage to the asset, or unmet obligations, for example.

    • Residual Value

      This is the estimated value of the leased asset at the end of its lease term.

    • Amount Due At Lease Signing

      This is the amount to be paid by the lessee at lease signing if there is a down payment option in the lease.

  • The Business Partner Contract Assignment entity for the lease agreement represents the relationship between the lease agreement and the business partner.​​ The roles of the business partner contract assignment represent the roles of the lessee and lessor.

  • The Lease Rate entity specifies the amount payable by the lessee to the lessor in a lease agreement for the use of leased asset.

  • The Scale Interval entity represents the increase or decrease of the lease rate, which depends upon a set of preconditions or scale intervals.

  • Physical Asset

    This entity represents a non-fungible physical asset such as a vehicle, aircraft, ship, or property that is leased out in a lease agreement:

    The Physical Asset Financing Assignment entity enables an n to n relationship between the Physical Asset and the Loan entities. A physical asset can be financed by multiple loans. A loan can be used to buy multiple physical assets.

    The roles of the business partner physical asset assignment represent the lessor and lessee. Business partner roles are:

    • Legal owner (business partner who is the legal owner of the physical asset)

    • Beneficial owner (business partner who enjoys the benefits of ownership and even if the legal title of the physical asset is in another business partner's name)

Lease Service Agreement Diagram

This diagram represents a commitment between a service provider and a lessee or lessor:

The Lease Service entity specifies the leasing services that are available for a leased object in a lease agreement.

The roles of the business partner contract assignments represent the servicer, administrator, lessee, and lessor.

More Information

For more information, see the related entities and their definitions in the data model represented in SAP PowerDesigner.