NetLessor - Separating Accrued Interest from NIL
In certain cases, a company may need or want to separate the accrued interest from the Net Investment in Lease balance. When this is done in NetLessor, the interest can be set not only to capitalize monthly, but it can be set to capitalize at other frequencies like quarterly, only on payment dates, or never. This will cause accrued interest that is not paid down by a monthly payment to accumulate accrued interest in a separate GL account. Future interest calculations will not incorporate the accrued interest balance and will continue to be based only on the Net Investment in Lease. Payment made by the lessee will first reduce accrued interest then be applied to the NIL. See below instructions for how to set this up.
Setup
To setup custom interest capitalization frequencies, take the following steps:
1. Update the following setting on the Global Settings page:
2. Update all lease types to have an "Accrued Interest Receivable Account" and set the "Default Interest Capitalization Frequency" which will default "Interest Capitalization Frequency" on leases of that lease type going forward.
3. On each existing lease, ensure the "Interest Capitalization Frequency" field on the Accounting subtab is set to the proper setting.