NetLease - Calculate Rate Implicit in Lease
Overview
NetLease includes a built-in feature that allows users to calculate the rate implicit in a lease directly from the lease record. This is useful when users have sufficient data inputs available and want to determine the appropriate discount rate (IRR-based) to apply to the lease.
Key Assumptions
The lease record contains all necessary financial inputs (e.g., fair value, initial direct costs, residual value, and lease payments).
The user has enabled the relevant system setting to allow implicit rate calculations.
Users have permission to access System Setup and lease records.
Prerequisites
Users must have access to NetLease > NetLease Setup > System Setup to enable the feature.
Financial values relevant to the lease (such as fair value, lease payments, and residual value) should be available for accurate calculations.
Step-by-Step Process
1. Enable Implicit Rate Calculation
Navigate to NetLease > NetLease Setup > System Setup.
Under the General tab, locate the section titled Lease Calculation Settings.
Check the box labeled Calculate Rate Implicit in Lease.
Click Save.
2. Access the Feature on a Lease Record
Open any lease record.
Navigate to the Accounting tab.
Locate the new section titled Rate Implicit in Lease.
3. Input Lease Data for Calculation
Enter the known values required for the calculation (e.g., fair value, direct costs, residual value).
The system performs an internal rate of return (IRR) calculation using the input values and lease payments.
4. View the Calculated Rate
The rate will update in real-time as input values are adjusted.
This calculated rate can be used as the lease’s discount rate.
Limitations/Things to Be Aware Of
This feature acts purely as a calculator and does not automatically apply the rate; users must manually input it where needed.
If inputs are incomplete or inaccurate, the resulting rate may be incorrect.
The feature is only available after the system setting is enabled.