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In this blog I will try to explain the basic a settings of Lease accounting with RE-FX in SAP.



A lease is a contract between two parties for the temporary use of an asset in return for payment. Leases can involve all kinds of assets, from property, such as office buildings, to equipment, such as machines, cars...

A lease contract documents key terms for each lease and is signed by both parties: the lessor and the lessee.


IFRS 16:

From 1st January 2019, IFRS 16 introduced a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. (More than 5000 USD).

The standard provides a detailed guide to assess if a contract is a lease, a service or both.


Lease accounting impact



IFRS16 terminology:


Lessor vs. Lessee: The lessor is the company that owns the asset being leased vs The lessee is the entity that pays the lessor for use of the asset.

ROU (Right of use): The right-of-use asset is a lessee's right to use an asset over the life of a lease.

Lease liability: A lease liability is the financial obligation for the payments required by a lease, discounted to present value.   A lessee measures the lease liability as the present value of lease payments that have not been paid at the present date.


Impact on financial process:


1/ ROU and lease liabilities

  • ROU Should be presented as their own line items.

  • Lease liability must be separately presented.

2/ Amortization and interest

  • Amortization of right of use must be booked.

  • Interest expenses should be recognized.

3/ Cash flow

  • Lease liabilities cleared with cash flow must be accounted.


IFRS16 accounting Scheme:


Recognize lease:



Recognize the lease


Payment and expense for the first year:

Postings for the first year



IFRS16 in SAP:


Two different SAP solutions can support the IFR16 requirement:

  • Lease administration by Nakisa.

  • Flexible real estate management (RE-FX).


In this blog we will explain how to use RE-FX for lease valuation under IFRS16.


Lease accounting in S/4 Hana



SAP CLM can be used in accordance with RE-FX to simplify the leasing solution landscape by:


  • Real-time valuation of finance leases

  • Elimination of financial interfaces

  • Reducing the number of applications in system landscape




Several analytics FIORI apps and embedded analytics are available for lease management and no additional license is required.


Analytics Apps for IFRS16


So now let’s dig into system configuration for Lease accounting with SAP RE-FX.


Basic setting for Lease accounting:


1/ Activate RE-FX in your controlling area:


First, RE-FX extension should be activated in the system.

To do this follow the IMG menu:  Flexible Real Estate Management (RE-FX) => Basic Settings => Activate Real Estate in controlling area


Activate RE-FX in controlling area


2/ Activate contract valuation:

After, we should activate the subfunction for contract valuation, for this we should follow the IMG menu: Flexible Real Estate Management (RE-FX) => Basic Settings => Activate sub function


Contract valuation


3/ Manage RE-FX basic setting in company code

Next, we need to go to IMG menu: Flexible Real Estate Management (RE-FX) => Basic Settings => Make basic setting in company code


You should fill in the three columns:


Company code: Add the company code in which you want to activate the function.

CCTp: Choose Manager company code if the real estate belongs to your company.

Accounting system: If accounting system is SAP select FI.

Keep company code optional for input tax (For each company code, you have to specify in Customizing whether or not the company code)


RE-FX setting in company code



Now the basic setting has been set we can move to the balance sheet valuation.


Balance sheet valuation:


1/ Valuation

First, we need to define specific settings for the balance sheet valuation for each contract type.

For this go to the IMG Menu:

Flexible Real Estate Management (RE-FX) => Balance-sheet valuation contracts => Control setting for each contract


                                                           Valuation-specific attributes


Select the company code and choose the application object: REGCOE (Valuation only) and integration type (Asset accounting => For full integration with asset accounting).

You can choose a reference interest rate that can be used by default (LIBOR, EURIBOR …).


2/ Valuation relevance:

As explained in the introduction, under IFRS16 lease contract with an initial value less than 5000 Euros should be excluded, same exception applies for contract with a duration less than 12 months.

For this go to the IMG Menu:

Flexible Real Estate Management (RE-FX) => Balance-sheet valuation contracts => Valuation relevance

                                                             Valuation relevance


We should add new valuation relevance:

LEWVALEASE: Low value lease.

SHORTLEASE: Short Lease.

Both should not be relevant for lease accounting.


3/ Valuation rule:

The valuation rule is one of the most important configuration points to control all the lease valuation rules and postings.

For this go to the IMG Menu:

Flexible Real Estate Management (RE-FX) => Balance-sheet valuation contracts => Valuation rule

We can use IFRS16 valuation rule or copy it if we want to change it.

Valuation rule


In valuation rule choose your IFRS16 accounting principles.

Valuation parameters



Valuation parameters:

Select valuation type: Balance sheet capitalization (Used for IFRS and US GAAP)

And condition valuation group: Condition types for valuation Acc to IFRS16.


BS Capitalization parameters


In linearization parameters choose linear type: From open period (Linearization)

From Open Period (Linearization): The date of the first open period of the linearization cash flow is used as the new start date. As a rule, linearization is not changed retroactively. However, if a contract is terminated or conditions are changed so that all periods are already posted at the contract end date, the calculation determines the remaining value and posts this value as a one-time adjustment, if necessary, retroactively to the period of the contract end date.

From Start: The original start date of the calculation is always used as the calculation start date. Any linearization rates posted are always corrected retroactively and distributed over the complete calculation interval.

From Start of Analysis Period: The consideration start date (which could be a future date) is used as the new start date. Any retroactive changes to relevant conditions can also lead to retroactive corrections to the linearization.

From Open Period (Payments): The first open period of the partner cash flow is used here.

For classification select: ROU Approach (Linear depreciation of right of use).


Flow types: 


Finally, we should manage the flow types, flow type are very important they are the key points for all the generated postings:


Flow Type Acquisition: This flow type is transferred to the cash flow for asset transactions (acquisitions and retirements) in FI-AA

Flow Type Depreciation: This flow type is transferred to the cash flow for depreciation transactions (depreciation and write-up) in FI-AA.

Payment Flow Type: This flow type is transferred to the cash flow for payment flows on the lease liability.

Flow Type Interest: This flow type is transferred to the cash flow for interest transactions on the lease liability.

NB: The general ledger accounts to be used for postings are derived from this flow type.


Company code assignment:


Company code assignment


Once the valuation rule is defined, we should assign the company code and the IFRS depreciation area that should be used to post IFR16 (Depreciation area linked to IFRS accounting principles)


Contract type assignment:


The contract type for lease accounting should be assigned to the valuation rule.


Contract assignment


The contract type for lease accounting should be assigned to the valuation rule.


4/ Valuation object-dependent control parameters (Integration with AA):


Valuation objects control the integration with asset accounting, in this step we should specify the asset class in which the ROU will be created.

For this go to the IMG Menu:

Flexible Real Estate Management (RE-FX) => Balance-sheet valuation contracts => Valuation object Dependent control parameters.

Valuation parameters control (AA integration)


Select the object type: J4 (Contract object), object type can be a parcel of land, a building, a piece of equipment, or a contract object.

Diff criteria name: For example, property, machinery, or vehicle. Select diff criteria 01: Buildings.

Select contract type: RE (RE-FX leasing)

Account determination value: Account determination value will be used after for all the lease accounting postings.

In asset determination and class type, select the appropriate asset class (You should create the dedicated asset class for leasing).



5/ Assignment of asset transaction type (AA integration)


Now we should classify business transaction types and map them to the appropriate RE flow type.

IMG menu:

Flexible Real Estate Management (RE-FX) => Balance-sheet valuation contracts => Assign asset transaction types


Mapping between flow types and asset transaction types


We should link all the following process:


A = Acquisition

B = Credit Memo in Acquisition Year

C = Credit Memo in Following Year

D = Depreciation (on Current-Year Acquisitions)

E = Depreciation (on Prior-Year Acquisitions)

N = Retirement (from Current-Year Acquisitions)

P = Reactivation

R = Retirement (from Prior-Year Acquisitions)




6/ Account determination


Next, we should configure the settings for account determination. Account determination is used to control postings based on flow types.

Account determination procedure

The flow type is first used to set up the posting record. The accounts to be used are represented initially by account symbols.

On the replace account symbols screen, you define how the account symbols are to be replaced in the posting run by accounts from Financial Accounting.


IMG menu:

Flexible Real Estate Management (RE-FX) => Accounting => Automatically generated accounting documents => Account determination


Accounts symbols:


In this activity, we define account symbols that you then replace in your accounting system, dependent on the chart of accounts.

The posting specifications in RE-FX do not contain accounts, they contain account symbols that then lead to the accounts in the accounting system


Account symbols


We can use the standard account symbols.

Or create your own symbols.


Account determination:


In account determination we should link the Asset valuation type with accounts symbols to control the lease postings.


Account determination


GL accounts for accounts symbols:

Account symbols should be linked to the dedicated GL accounts.


GL accounts for account symbols



Please share with us your feedback, suggestions, questions and thoughts regarding this topic in comments.

For more information and to get updated with all new SAP S/4 Hana insights I encourage you to follow the SAP S/4HANA Finance: https://blogs.sap.com/tags/67837800100800006927/


For similar content please follow my profile.




  • Lease accounting with SAP: IFRS16 and ASC 842 (SAP Press).

  • SAP Webinar 24567: What's new in lease accounting.

  • IFRS 16 new leases PWC.

NB: This blog was written in collaboration with my colleague: Chaker Neffati.


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