Manage Discount Rates

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.

You can use the filters at the top of the Manage Discount Rates page to search for specific discount rates. The filters are as described below:

• Effective Date: Last date that the discount rate is effective.

  This date references the date the schedule was created.

• Length (In Months): Term length in months.

• Country: Country this discount rate applies to.

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

• Portfolio: Portfolio this discount rate applies to.

• Accounting Method: Select the option you want:

  • Finance: IFRS and GASB schedules are included in discount rates tagged with either the Finance lease type or the All Types lease type.

  • Operating: Leave the field blank to search for both methods.

• Use Type: Select the use type of the lease.

To add a discount rate:

1. Click Add Discount Rate.

   The Add Discount Rate window opens.

2. Complete these fields:

   • Effective End Date: Last date that the discount rate is effective.

   • Length Month (min): Minimum term length in months.

   • Length Month (max): Maximum term length in months.

   • Discount Rate: Discount rate in this field.

   • Country: Country this discount rate applies to.

     You can select more than one country. However, if you select multiple countries, the State / Province field is disabled.

     For example, you could select the United States and Canada.

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

     You can select more than one state or province. However, if you want to select multiple states or provinces, you can only select one country.

     For example, if you selected India from the Country field, you could select Punjab, Haryana, and Rajasthan from the State / Province field.

   • Portfolio: Portfolio this discount rate applies to.

   • Accounting Method: Select the option you want:

     • Finance

     • Operating

       If you leave the field blank, the Discount Rate applies to both methods.

   • Use Type: Use type of the lease.

   • Notes

3. Click Add.

   The window closes. The discount rate appears in the table.

To edit a discount rate:

1. Find the discount rate you want to edit.

2. Click Edit in the Actions column of the record.

   The Edit Discount Rate window opens.

3. Make your changes.

4. Click Update.

   The window closes. Your changes are saved.

To delete a discount rate:

1. Find the discount rate you want to delete.

2. Click Delete in the Actions column of the record.

   A dialog opens, asking you to confirm your choice.

3. Click Yes.

   The dialog box closes. The discount rate is deleted.