Note: Configuration flag CFGEnableTCLeaseAccounting must be enabled.
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At the commencement date, the ROU-A is the sum of the initial measurement of all Lease Payments that were made on or before the commencement date. This equates to the net present value (NPV) of the Lease Payments from the commencement to the completion of the Time Charter contract plus the initial payment to the owner. Since the first Hire Payment is made to the owner on or before the delivery of the vessel, the lease payment related to that first billing period does not need to be discounted.
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- Contract Duration: Delivery-Redelivery period of a TC contract, in days
- Frequency of Lease Payments: TC billing period value with the following converted values:
- Monthly and nth day of Month = 12 periods/year
- Semimonthly = 24 periods/year
- Biweekly = 104 periods/year
- Weekly = 52 periods/year
- Every 30 Days = 12.175 periods/year
- Every 15 Days = 24.35 periods/year
- Every 10 Days = 36.525 periods/year
- Every 5 Days = 73.05 periods/year
- Total Number of Billing Periods = Contract Duration * Frequency of Payments
- Value of Lease Payment per Period = Hire Cost for period less Address Commission for period less Service Cost (from the TC Service Rate Schedule) for the period
- If there is an Off Hire in days, then deduct from the Value of Lease Payment per Period the following amount: Number of Off Hire Days × (Hire Rate − Address Commission − Service Cost) × Off Hire TC In Percentage
- If there is a lumpsum Off Hire, then deduct from the Value of Lease Payment per Period the following amount: Off Hire Lumpsum × (Number of Off Hire Days in the Period / Total Off Hire Days)
- Discount Rate per Period = ((1 + Discount Rate) ^ (1 / (365.25 / Period Duration)) − 1
- T = Indicated period
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Here is the same formula with typeset formatting:
Sample Calculations of
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ROU-Asset
Click here to download a spreadsheet of sample ROU-Asset calculations.
Contract Modification
The formula for calculating the ROU-A and LL for the contract do not change when there is a modification the contract value, but the variables change as does the workflow for handling these changes.
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