The Leased Assets scenario describes the management of leased assets from the standpoint of the lessee.

Leased assets create special accounting requirements for the lessee, as compared to assets that an enterprise purchases or produces itself. During the term of the lease, under certain conditions, leased assets remain the property of the lessor or manufacturer. They represent, therefore, a special form of rented asset. Such assets are legally and from a tax perspective the responsibility of the lessor, and are not relevant for assessing the value of the fixed assets of the lessee. However, in certain countries, you are required to capitalize leased assets, depending on the type of financing involved.

This scenario makes it possible to handle different types of leased assets differently. Depending on legal restrictions, you can capitalize and depreciate leased assets (capital lease) or post their rent expense periodically to the profit and loss statement (operating lease).

You manage fixed assets in a subsidiary ledger.

If you want to manage capitalized leased assets in the system (capital lease), you need to do the following:

1. Define leasing types with the specifications needed for posting asset acquisitions.
2. Create special asset classes and account allocations for your leased assets.
3. Activate the depreciation areas in which the leasing types will be depreciated.
4. Assign the appropriate leasing type in the master records of leased assets and maintain the terms and conditions of the leasing agreement.
5. Post the acquisition of a leased asset with the display transaction for the asset master record. This function capitalizes the leased asset at the present value of lease payments and creates an FI document for the lease payments.

If you want to capitalize an asset as a statistical leased asset (without a depreciation area) or manage it in the cost-accounting depreciation area only (operating lease), proceed as follows:

1. Choose an asset class, which has no active depreciation areas, or in which only the cost-accounting area is active.
2. Specify the conditions of the lease in the asset master record.
3. Enter a leasing type.
4. Post the asset acquisition using a transaction type that only posts to cost-accounting depreciation areas.
5. In FI, create a recurring document for lease payments.

After invoices are posted in the system, payment can be processed using the FI payment program.

How you process the cancellation of a lease depends on the lease method:

• In the case of a capital lease you determine if the asset is being purchased or returned. If the asset is being purchased, you post an asset transfer, if it is being returned, you post a retirement.
• In the case of an operating lease, you simply delete the master record for the statistical asset. The rental agreement must also be closed in FI (flag the recurring entry document for deletion).
• If the lease is canceled ahead of time, you have to reverse the future liabilities that are due.