The asset leasing module in Dynamics 365 Finance & Operations allows finance team members to create lease contracts containing fair value, implicit rate, lease terms, and all the other pertinent info for assets. The system requires you to follow the steps in a specific order for the functionality to work.
Below are the instructions, written from the perspective of the lessee renting a car, as an example. (A lessor can use this functionality too, but it could be more difficult.)
Note that the asset leasing module itself does not support taxes in any country. There is a workaround where taxes are typed in Lease incentives, which users do at the end of the asset leasing process described below. In asset leasing in Finance & Operations for most countries, you can utilize ASC842 and IFRS 16. If you need Lease incentives for some other purpose, and you need taxes as part of this process, asset leasing may not be the right module for your company to lease items.
Even though most customers, commentators, and consultants still call it Dynamics 365 Finance & Operations or D365FO, Microsoft now technically licenses it as Dynamics 365 Finance and Supply Chain Management.
After all requirements have been filled out, (see blog: How to Set Up Asset Leasing in Dynamics 365 Finance & Operations), the creation of an asset can begin.
How To Use Asset Leasing
Asset leasing -> Leases -> Lease summary.
Click on “+New.”
Example of General Lease Details
- Lease description: BMW 5 Series GT
- Fair value of the asset: $58,905.48
- Incremental borrowing rate: 7.69%
- Lease term (month): 37
- Asset useful life (month): 37
- Lease group: Vehicle
- Lease incentives (taxes): $7,371
- Start date 09/01/2023
- Prepayment/1 installment: $12,000
- Monthly payment: $967 (35 installments)
- Lump sum including monthly payment: $17500+$967=$18,467 (Last installment equal to 37 months)
Note: A lot of fields can be filled out such as vendor or fixed assets, as well as several fast tabs such as index rate, financial dimension, executory costs, payment schedule lines, etc. This has not been included in this example.
In the general tab, fill out the red fields in the boxes.
Go to the fast tab “Payment schedule lines”.
Click on “+Add”.
Line 1: 1st installment.
Line 2: 35 installments.
Line 3: Last installment and lump sum.
Note: The period interval is 1 day in the beginning and the end.
Go to the action pane and click on “Create schedules”.
In the action pane, click on “Books”.
Go to the action pane and click on “+New”.
Choose the book you would like to use: ASC842 and IFRS are standard books in this module.
Once you’ve selected your book type, click “Create book”.
Now all the fields have been filed out.
In the action pane, click on ”Function”.
First you have to click on “Create schedules” to activate the book.
When you click on “Create schedules”, the payment schedule, asset depreciation schedule, and liability amortization schedule becomes active.
The next few steps have to happen in a specific order. First, click on “Payment schedule”.
Verify the numbers.
If the numbers are okay, click on “Confirm schedule”, and the confirmed button, to move to confirmed.
Click on “<-“.
Click on “Initial recognition” and go to “Asset leasing journals”.
In order for the other schedules to work, you have to post the payment. Check the payment before posting and ensure it goes to the correct accounts. The accounts have been set up under asset leasing parameters. The first line is the journal number, and the button shows the posting itself.
Note: If you click on “Journal details”, it will take you out in a normal journal, and you will be able to post taxes on these accounts, even if it never shows here.
If you agree, click “Post”, and go back.
Now the other schedules are active. Go to “Asset depreciation schedule” or “Liability amortization schedule”.
If you went to this before you posted the payment, “Create journal” would not be active. Therefore, the payment schedule always has to happen first.
When you click on “Create journal”, it will become inactive until the journal has been posted under “Asset leasing journal”, then it will become active again for the next month.
Create the “Liability amortization schedule”, or go to “Asset leasing journal” to check and to post the journal.
Here, you can see the already posted payment journal. Verify and post, or do the same steps for “Liability amortization schedule”.
Some additional things to note are:
- All periods for the period need to be open. If one of the periods within the lease term is on hold, you will get an error.
- Taxes can be put on if you choose the journal details. But if you view it under “Asset leasing journal”, it will not show up and you cannot see it.
- If you have a vendor attached to the lease, you can go to Asset leasing -> Journal entries -> Asset leasing journal. There you will find the journal for the invoice posting on the vendor. Here you will also be able to see all the other journals.
- If you would like to change your lease, you can use the Adjustment Wizard. Go to Asset Leasing -> Leases -> Lease summary | Adjustment wizard.
- If you would like to terminate your lease, go to Asset Leasing -> Leases -> Lease summary | Termination proposal.
If you would like to learn more about working in Dynamics 365 Finance & Operations, please get in touch with us.
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