Search for Another Discount Rate - Common Procedure

The system searches for a configured discount rate from several sources to serve as the default discount rate. The system searches in the following order:

1. Locked Accounting Assumptions discount rate (within schedule date range)

   Please see the section below about how Lucernex uses accounting assumption records in the discount rate lookup process.

2. Contract-level discount rate

3. Manage Discount Rate table

4. Portfolio-level discount rate

5. Firm-level discount rate

For discount rates on the Manage Discount Rates table, Lucernex will search for a discount rate that most closely matches the contract and is closest to the current date.

For example, imagine there are two discount rate records that are effective until the same date, but one is specific to the Marketing portfolio.

• Discount rate 1

  • Effective Through: 12/31/2020

  • Rate: 10%

  • Portfolio: All

• Discount rate 2

  • Effective Through: 12/31/2020

  • Rate: 12%

  • Portfolio: Marketing Portfolio

If you wanted to generate a lease accounting schedule for a contract that belonged to the Marketing portfolio, and there was no contract-level discount rate, Lucernex would select Discount rate 2.

Discount rates are also applied using a time range parameter. For example, one discount rate can be applied for contracts where the term length is between 31 and 60 months, and a second discount rate can be applied for contracts where the term length is between 61-120 months.

However, this raises the question—how does the system interpret partial months? In the example above, what if the term length was 60.25 months?

In the scenario described above, the system will use the discount rate that applies after rounding down—in our scenario, the system would not apply discount rate 2 unless the term length was greater than or equal to 61.00. The logic appears in the list below:

• Discount rate 1 is applicable between 31.00 and 60.99 months

• Discount rate 2 is applicable between 61.00 and 120.99 months

Using this logic, the 60.25-month term would use Discount rate 1.

Discount Rate lookup behavior in relation to Accounting Assumptions records

In addition to the logic listed above, the system handles discount rates on accounting assumptions records in the following manner:

• If there is an unlocked Accounting Assumption record with a discount rate and dates, if you create a schedule, the Discount Rate DOES NOT populate from the Accounting Assumption record.

• If there a locked Accounting Assumption record with a discount rate and dates, if you create a schedule that is outside the date values of the Accounting Assumption record, the system DOES NOT populate from the Accounting Assumption record.

• If there a locked Accounting Assumption record with a discount rate and dates, if you create a schedule that is within the date values of the Accounting Assumption record, the system DOES pick up the Discount Rate value from the locked Accounting Assumption record.

To select a new discount rate:

1. Click Magnifying Glass next to the Discount Rate field.

   The Manage Discount Rates window opens. This window contains all the discount rates loaded into the system.

2. Use the filters at the top of the window to select narrow the results returned in the window.

   • Effective Date: Enter the last date that the discount rate is effective in this field.

     Important!

     This date references the date the schedule was created.

   • Length (In Months): Enter the term length in months.

   • Country: Select the country this discount rate applies to.

   • State / Province: Select the state or province this discount rate applies to.

   • Portfolio: Select the portfolio this discount rate applies to.

   • Accounting Method: Do one of the following:

     • Finance

       Important!

       IFRS and GASB schedules will be included in discount rates tagged with either the Finance lease type or the All Types lease type.

     • Operating

       If you leave the field blank, you can search for both methods.

   • Use Type: Select the use type of the lease from this field.

   • Show All: Select this check box to show all discount rates in the table.

     If you have not selected a begin and end date for your record, this check box will not appear.

3. Click the discount rate you want to use.

   The window closes. The discount rate you selected appears in the Discount Rate field.