ARO information is entered on the ARO tab of EZLease. A lease record is required to enter an ARO. However, if you have an ARO that is not actually connected to a lease (that is, an ARO connected to an owned asset), you may set up a lease record with classification type ARO Only and leave the rent and other lease-specific information blank. The begin and end date for the record are then calculated automatically based on the dates for the ARO(s) on the record.
An ARO is structured with layers, revisions, and payments. Each ARO must have at least one layer.
An ARO remains active until it is explicitly terminated (unlike a lease, which automatically terminates on its end date). If you do not enter a termination date for an ARO, EZLease will either leave the liability unchanged after the scheduled end date, or continue to accrete the ARO based solely on the inflation rate, depending on the System Option you select.
Navigating the ARO Tree
The ARO tab displays on the left a tree of all AROs for a particular lease, with the associated layers, revisions, and payments attached. On the right, at top is shown information for the overall ARO. Underneath comes the layer and its revisions (if any). An individual layer may have its end date or rates revised; if so, each revision has a separate entry in the tree; click on it to display its input and calculated values. (Rate changes based on the IFRS rate table in System Options do not generate new revisions.) At the top of the tab, the Total ARO is shown. This includes all AROs for the lease that have not been early terminated, no matter when their normal end date is. Payments are attached to an overall ARO, not to an individual layer; they are automatically applied to the oldest layer first.
Click on an entry in the tree to display that layer, revision, or payment. If the window size for EZLease is too short, the layer/revision information and the payment information are displayed in the same place; one covers the other when you click on the relevant item in the tree.
All actions to ARO records can be initiated either by right-clicking in the ARO tree and choosing from the context menu or choosing from the ARO menu. Some actions also have toolbar buttons directly above the tree. In the instructions below, “choose x” means to choose the x option from either the context menu or the ARO menu.
- You may not edit a prior revision of a layer, nor may you delete an individual revision in the middle of a layer’s revision list. You may delete an entire layer by clicking on the initial layer revision; either choose Delete from the context menu, or choose Delete ARO Item from the ARO menu, or click on the X above the tree. You may also delete the last revision by clicking on it and selecting Delete as
- To enter a new ARO, click the Add icon, or choose Add ARO.
- To add a layer to an existing ARO, click on any entry in the tree that belongs to that ARO (the ARO itself, a layer, revision, or payment). Then choose Add ARO Layer.
- You may wish to create several layers, starting at the same date and ending at regular intervals, for the same This is useful if you expect to retire the asset in stages and settle the ARO at each step. Click on any entry in the tree that belongs to that ARO. Then choose Add Multiple Layers. A secondary window opens: Enter the begin and booking date for all layers, the first and last end dates, the frequency of setting the end date, cost per layer, inflation rate, and risk-free rate. For instance, to enter 5 layers of 1000 each, to expire at the end of each calendar year from 2020 through 2024, you would enter 12/31/2020 as the first end date and 12/31/2024 as the last end date, layer every 1 years.
- To revise a layer, click on its last revision, then make the needed changes in the Revision box. When you save the revision (click on the Save icon, right-click on the tree and choose Save Changes, choose Save ARO Item on the ARO menu, save the whole lease record, or move to a different ARO, layer, or payment), EZLease asks you whether the change should Revise or Replace the existing information. As with a lease revision,
- To add a payment, click on any entry in the tree that belongs to that ARO. Then choose Add ARO Payment.
- To move or copy an ARO to another lease, choose Move/Copy ARO. See Move/ Copy AROs, later in this
- To move a layer from one ARO to another, choose Move ARO The layer can only be moved to another layer for the current lease. Choose the receiving ARO. If this is the only layer for the current ARO, the overall ARO entry is removed once the layer is moved; if you have any associated payments, you are given the option to move them with the layer. You can only move a layer to another ARO belonging to the same lease (or non-lease ARO Only record). To move an individual layer to an ARO belonging to another lease, first copy the whole ARO to the receiving lease or ARO Only property, move the layer to the new ARO, then delete the copied ARO, if anything is left. Then go back to the original lease/property and delete the original layer.
- To move an individual layer to an ARO belonging to another lease, first copy the whole ARO to the receiving lease or ARO Only property, move the layer to the new ARO, then delete the copied ARO, if anything is left. Then go back to the original lease/property and delete the original layer.
- To retest for economic penalty, choose Retest for ARO Penalty or click the red checkmark icon. It is possible to adjust the dates of a lease in such a way that an economic penalty test previously done is no longer valid. Click this button to retest all the AROs of the current lease for economic penalty requirements to renew the lease.
- To cancel a change that you haven’t yet saved to an individual ARO item, such as to a layer revision, choose Cancel ARO Change or click the undo arrow
- To save a new or changed ARO item, choose Save ARO or click the save button. EZLease validates all input, then checks for financial changes (to the payment amount, begin or end dates, or rates). If a financial change on an existing ARO is found, EZLease gives you the option to revise the existing ARO or replace it, similarly to the revision/replace option for a lease.
- Once complete, EZLease does the economic penalty calculation if appropriate, and updates the lease Please note, however, that the change is not actually saved to your database until you click Save Lease to save the entire lease record (of which the AROs are a part).
- To undo all changes since you unlocked the lease, click on Cancel Changes.