Lease Accounting

There are two types of lease accounting capital lease and operating lease, unlike capital lease
operating lease is shown on the balance sheet of the lessor (one who owns the asset that is leased
to someone else) in all operating leases. in the case of the capital lease , whether the leased asset
will be on the balance sheet of lessor or lessee (one who makes use of the asset but is not the
owner) is determined by several factors that will differ whether the lease is with or without
purchasing options for the lessee.
In SAP the component is FI-LA (also unknown as FI-AA-LM), lease accounting can process
leases and will enable automatic asset related postings in FI-AA and contract-related accrual
postings in FI-G/L, as well as the required one-time lease postings. The lease accounting engine
(FI-LAE)you can use FI-LA to process the leases in the SAP CRM system using the quotations
and contracts functionality and price them using IPC (Internet Pricing and Configurator) and
FiMa (Financial Mathematics in Leasing).
The FI-LA works by finalizing a lease contract, CRM billing generates the Billing Requirement
Items (BRI) and using the CRM application Transaction Tax Engine (CRM TTE) that can be
integrated with third-party tax solutions like Vertex and you can then calculate the lease taxes on
the leases. You can use contract A/R and A/P to handle lease receivables and cash, then you can
use reporting tools to obtain the information about the leases.
We will cover the following in this section

Lease accounting engine (FI-LAE)

Basic settings

Value determination

Production setup

Reports

Lease Accounting Engine (FI-LAE)

The Lease Accounting Engine (FI-LAE) is integrated with SAP CRM to control and manage the
entire transactions postings in FI-LA, at the center of lease accounting the LAE picks up the
contract values automatically from the CRM contract when a new lease is created or if there has
been a contract change in the CRM system, and then classifies the lease as a operating lease or a
capital lease with or without Bargain Purchase Option (BPO).
The necessary postings are then made in FI-AA for the asset creation and capitalization on the
basis of customization settings, when you have defined and assigned the accounting principle to
the company code for parallel accounting, the LAE can support valuation lease assets for both

book depreciation and taxation purposes, when changes are made the LAE updates the FI-AA
with the details on lease terminations, lease extensions, etc. With the valuation rules defined, the
LAE performs accrual postings automatically in FI-G/L, it also posts one-time accounting entries
such as inventory relief.

Basic Settings
We need to define and assign a few basic settings to configure lease accounting, we will start
with assigning the account principle to the company code using transaction 0FILA006_1,
remember we have already defined the accounting principle to be used for parallel accounting in
section Financial Global Settings and Company Code Parameters, to facilitate parallel valuation
of lease assets we need to associate each participating company code to at least one accounting
principle, select FILA as the leasing component on the initial screen,

You need to set the appropriate application component of FI-AA using transaction
0FILACOMPSET, we set this to FILA

Next we create the company code grouping key using transaction code 0FILA008G_1, you
create the group key to represent all the company codes in the same country or geography

Next we assign the company codes to the company groups using transaction code 0FILA008_1,

The next step we assign the interest calculation method to company code, you can use the
interest calculation method (360E/360, 360E/365, Act/366, etc) which determines the number of
days between two calendar dates and effective interest method (such as linear or US method for
use in FiMa) to be used per company code per accounting principle, the example i used above
360E/360 means that this is the european market, 360 indicates that a year contains 360 days on
the basis of 30 days per month. The assignment of the interest calculation method together with
the effective interest method helps FiMa calculate the annuity and present values.
We will use transaction code 0FILAIRCM_1,

Now we will specify the dates for posting, you can specify how the various dates (installation
date, contract start date, contract end date, etc) of a lease are revenant for posting (asset value
date for example) are to be transferred from leases to accounting, we can use transaction code
0FILA009F_1,

Value Determination
The value determination decides the values that need to be transferred from CRM contracts to FI
and it occurs through the value ID's, which carry the information about the origin of a value
((from a contract item, material master record, customer master record, condition types, etc) and
its functions (such as amount financial and residual value) to LAE, the lease LAE then
determines the values from the CRM contract and forwards them to FI. We first create the value
ID's using transaction 0FILA003_13, SAP supplies a number of values ID's which you can use
(prefix will be $), you can also create your own if necessary

Next we transfer the values from the contract item and master records (material or customer), we
will use transaction code 0FILA009V_1,

You can also transfer values from the material master or customer master to the value ID's for
further processing in FI-LA

0FILA009V_2 - transfer values from material master records

0FILA009V_4 - transfer values from customer master records

Now we will transfer the values from the condition types using transaction code 0FILA007_1,
the amount identifier will determine if the transferred value is something like interest amount or
repayment, the flow category distinguishes the value flow such as an interim payment (like a
down payment) from regular periodic repayment.

cnty - condition types

flowc - flow category

value id - the value ID

pp - periodic payment indicator

ID - amount identifier

To determine the present value (PV) of a leased contract you need to maintain the interest rate
and a base value, we can use transaction code 0FILA003_3, the use column either can determine
the base value (use = 1) or interest rate (use =2)

You can also use a formula to create new value IDs for example by adding two values ID's,
however the value ID's in question have to be either both numeric or alphanumeric, the system
will perform 10 iterations before it throws an error, you can use transaction code 0FILA003_1,

You can also use substitution to determine the value, you can determine a range of comparison or
calculation operations to determine values, you first define a base structure, substitution rule and
settings for value transfer for base structure
Mandatory Settings
When you complete the mandatory settings the system will automatically create value IDs with
the prefix $ and transaction types for automatically generated asset transactions, based on the
customizing settings in the previous steps, you must do this otherwise you will not be able to
post automatically, we will use transaction code 0FILAALOG_01, once you have confirmed all
the details you select F8 to generate the log, then you can complete the production setup by
double-clicking complete on the resulting screen, the system will then generate the additional
value IDs and the asset transaction types automatically.

Reports
There are a number of reports that you can use

S_XB7_96000248 - calculated (accrual engine display calculated accruals)

S_XB7_96000249 - posted leased accruals (accrual engine display calculated)

You can enhance the reports by adding /changing the nodes in the logical database FILA using
transaction code 0FILASTRUC_LDB_ITEMS, you can assign value ID's to fields of the
logical database using transaction code 0FILALDB000_002.