Dynamics Community Forum Thread Details

Asset Leasing

Hi experts,

I have got following scenarios from my a customer, can someone help me how to achieve the scenarios in asset leasing module?

1. Depreciation Schedule Changing Due to Interest Rate Modification

In Asset Leasing within Microsoft Dynamics 365 Finance, how should the system behave when the lease interest rate is changed after the lease has already started?
For example, if a lease initially uses an incremental borrowing rate (IBR) of 8%, but later—due to market conditions or internal policy updates—the rate is revised to 10%, should the system automatically recalculate and update the depreciation schedule?
If yes, what is the correct process to follow and which system functions should be used to ensure compliance with IFRS 16?

2. Handling Change in Lease Term and Useful Life

How does the Asset Leasing module handle scenarios where there is a change in the lease term that also affects—or conflicts with—the useful life of the underlying asset?
For example:

The useful life of the asset is 36 months
The lease term is 60 months
If the lease term is modified (e.g., extended or reduced), how does Dynamics 365 determine the correct depreciation periods?
Does the system prioritize the shorter of the lease term or useful life, and how should users manage such changes to ensure accurate ROU asset valuation and amortization?

3. Missing Field for Original Purchase Cost of Asset

In the Asset Leasing module, I notice that there is no dedicated field to enter the original purchase cost of the leased asset.
Is there any field—other than Fair Value—where the original purchase cost can be recorded for reference?
For example, if the asset’s actual purchase cost is $25,000 but the fair value needs to be captured separately for lease calculations, is there a recommended method (such as a custom field, asset book setting, or another standard field) to store this information?

4. Interest Should Not Be Included in ROU Asset Recognition Value

During lease commencement or when recording advance payments, the system appears to include interest/markup amounts in the Right‑of‑Use (ROU) asset value, which should not happen under IFRS 16.
For example:
If a business pays a lease advance of $10,000, and $2,000 is interest, the ROU asset should only include the principal portion, not the interest.
How can we ensure that the system correctly excludes interest/markup amounts from the ROU asset value during initial measurement?
Is there a standard D365 functionality to handle this, or does it require configuration changes/customization?

Categories:

Dynamics 365 Finance

Hello,

I'm going to try to give you some feedback:

1. As far as I know, you can apply an index rate type to our lease book. Then, to run the periodic revaluation tied to the interest rate change, you need to run the Index rate revaluation process. It's a batch job available in the periodic procedures (Asset leasing > Periodic > Index rate revaluation).
2. Depreciation is calculated based on the lease term. If you need to make modifications, there's a function called Adjust book on the lease book.
3. There is no direct integration between the PO module and the Lease module. At most, you can purchase an asset using a PO and then link that asset to a lease contract. If you need to reflect the original cost, you'll have to enter it manually in the lease contract;
4. You can leverage expenses in the lease contract (see: executory costs payments/schedule lines).

Thank you,
Giorgio

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