Dynamics Community Forum Thread Details

Asset Leasing Module - Actual Useful Life of Asset

In the Lease module, I understand that we can specify the useful life of an asset under Lease Books > Asset Useful Life (Month).

The system then applies this value to calculate depreciation using the straight-line method (assuming no fixed asset ID is attached in the lease master). For example:

Right-of-Use (ROU) Asset Value: 12,000,000
Asset Useful Life: 120 months (10 years)
Monthly Depreciation: 12,000,000 ÷ 120 = 100,000

My Question

According to US GAAP (and other accounting standards that follow the five-test model for lease classification), the fair useful life of an asset can differ from the lease term.

For instance, if lease payments are scheduled for 9 years (108 months), I can depreciate the asset over 108 months. However, if the actual useful life of the asset is 10 years (120 months), I would like to record this separately so that the system can automatically perform the lease classification test.

Specifically, I want the system to calculate the Lease Term / Asset Life (%) as 90% (i.e., 9 years ÷ 10 years).

This percentage is critical because, under US GAAP, a lease covering 90% or more of the asset’s useful life should be classified as a finance lease.

At the same time, depreciation should still be posted only for the lease term (9 years), not the full useful life.

Requirement

Is there any separate field in the Lease module where the Actual useful life of the asset (e.g., 120 months) can be recorded separately from the lease term, so that the system can Perform the lease classification test correctly (showing 90% in this case).

Currently the lease classification test is performed on the Asset useful life (month) field, but this field is also used for depreciation of the ROU asset.

Lease Summary Screenshot

Here the Asset useful life (Month) field is used for asset depreciation as well as test both.

Lease classification test

My requirement is that 90 percent should appear there because the Actual life of the asset, which is 10 years let's assume, we are taking it for lease for 9 years, but since we are taking it for lease for 90 percent of the asset life then we will create it as finance lease in the system.

We will depreciate the asset for 9 years only as lease term is 9 years so.