Processing contract transfers

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What is a contract transfer?

A contract transfer is an operation which involves transferring a contract from one lessee (the transferor) to another (the transferee).

Implementation

This note provides the instructions required for setting up and understanding contract transfers in Lease.

In this document, we will use the terms:

  • Transferor (former lessee)
  • Transferee (new lessee)

This topic covers the following topics:

Repository

In "manage standards" of the repository, the client administrator will have to choose the right options for all the transfer operations that will take place in Lease.

The result of the operation will be entered in the income statement (the default option) or in reserves, depending on the option chosen.

Lease-Transferring one contract

On the contract sheet, "Contract transfer" must be selected from the events to trigger the calculation of transfer operations.

Note: The transfer may take place on a different date to that of the payment date.

Depending on the option chosen in the case of conversion, it may be carried out at the average rate for the period or the closing rate for the previous period.

The comments section is a free-text area.

Transferring multiple contracts

It is possible to transfer multiple contracts using filters in the contracts repository.

To do so:

  • Perform a search (in this example, two contracts will be transferred)

  • Select the option "Change multiple contracts" in the menu

  • The "Change multiple contracts" section has various fields, including the contract transfer event

  • The event must be confirmed in order to proceed with the transfer

  • You will be asked to confirm

Accounting treatment in the contract currency

In the transferor's accounts

The example below shows a contract with an annual payment. The contract is transferred on 10 February 2021.

In Lease, accounting events belong to the transferor until 9 February 2021 in the example, so the transfer date is not entered in the transferor's accounts.

No accounting items will be generated the day before this date. From this date, the "transfer" to the transferee will be entered.

Note: In this case, as the option affects the income statement, the transfer flow FC09 is not balanced.
The difference is owing to the income statement effect, which is entered in this case in credit balance of account L-R758-3 "Result from contract transfer (profit)".

It should therefore be noted that the accounts L-L120 "Result for the financial year" and L-L106 "Reserve" are not balanced to zero (they will be from the next tax year).

In the transferee's accounts

From 10 February 2021, the contract lessee changes, so the transfer date is entered in the transferee's accounts.

This means the transfer flow that appeared in the former lessee's accounts (the transferor) will appear in the transfer flow (FC09).

Note: In this case, as the option affects the income statement, the transfer flow FC09 is not balanced.

The difference is owing to the income statement effect, which is entered in this case in debit balance of account L-R758-3 "Result from contract transfer (loss)".

Accounting treatment in the lessees currency

As a reminder, accounts in the lessee's functional currency will be converted using the historical rate method. For more information, please see "Data Sheet - Conversion in Lease".

Please note, however, that contract transfer operations, separated in the transfer flow FC09 can be converted using two methods:

  • The average rate for the period on the transfer date
  • The closing rate for the period before the transfer date (used when the merger date will be the first day of the month)

Note: If the wrong option is chosen, it may be changed/deleted. Please see the "Other actions" section.

The "default" value is the "Average rate for the period" option.

When converting accounts, non-monetary items should be distinguished from monetary items.

In the transferor's accounts

After the transfer, the transferor's accounts no longer change.

This means that during the fiscal year the transfer is carried out, the accounting entries after the transfer period will no longer be affected by exchange rates.

Apart from non-monetary items, converted at the historical rate, the rate used for the transfer period is therefore the last rate applicable for the conversion of the transferor's movements.

In the transferee's accounts

The transferee's transfer flow is converted at the rate used for the transfer period by the transferor.

Also note that non-monetary items transferred to the transferee's accounts are converted at the historical rate used when entered in the transferor's accounts.

Accounting treatment in the consolidation currency

As a reminder, accounts in the lessee's functional currency will be converted to the consolidation currency using the historical rate method.

For more information, please see "Data Sheet - Conversion in Lease".

In the transferor's accounts

The transfer flow will therefore be converted from the amounts in the transferor's functional currency at the average rate for the transfer period.

After the transfer, the transferor's accounts no longer change.

This means that during the fiscal year the transfer is carried out in, the accounting entries after the transfer period will no longer be affected by exchange rates.

In the transferee's accounts

The transferee's transfer flow is converted at the rate used for the transfer period by the transferor.

Changing transfer parameters

Changing the transfer parameters involves allowing the user to change one of the three pieces of information requested when declaring the event.

To do this, go to the contract, then go to the event and change the anomalous criterion or criteria.

Note: If closed by your administrator, this may generate the flow FE11 "Correct again".

Deleting a transfer

Following the same principle as that of changing the contract transfer, it is also possible to delete the contract transfer.

To do this, go to the event and delete it using the appropriate button.

Exporting entries

It is important to specify that the mapping files used for the flows must be adapted in order to generate the entries.

The contract transfer will be managed by:

  • A new flow, flow FC09 "Transfer".
  • The account L-R658-3 "Result from contract transfer (loss)"
  • The account L-R758-3 "Result from contract transfer (profit)"

The templates provided by Lease therefore change with new lines being added.

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