> For the complete documentation index, see [llms.txt](https://learn.tryonederful.com/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://learn.tryonederful.com/ifrs-16/variable-interest-rate-contracts.md).
# Variable Interest Rate Contracts
Some lease agreements include a variable interest rate component that changes periodically based on an external reference rate, such as EURIBOR or another market index.
The IFRS 16 solution supports lease schedules that combine a fixed interest rate with a variable interest rate. When the variable rate changes, the lease schedule can be recalculated and adjusted accordingly.
The process consists of two steps:
1. Assigning a Variable Interest Rate to the lease schedule.
2. Recalculating the schedule after the interest rate changes.
## Assigning a Variable Interest Rate
To create a lease schedule with a variable interest rate component, select a **Variable Interest Rate Code** on the schedule card.
When a Variable Interest Rate Code is selected, the system verifies whether a corresponding interest rate exists for the Schedule Starting Date.
If no matching rate is available, the system displays an error message and the schedule cannot be calculated until the missing rate has been defined.
Variable interest rates are maintained in the **Variable Interest Rates** setup area.
After the required interest rates have been configured, lease schedule calculation can proceed normally.
## Variable Interest Rate Fields
* **Variable Interest Rate Code** - Defines the variable interest rate series used by the lease schedule. The value is selected from the configured Variable Interest Rate list.
* **Initial Variable Interest Rate Date** - Assigned automatically by the system and set equal to the Schedule Starting Date.
* **Variable Interest Change Method** - Determines how future interest rate changes are applied. By default, the value is **Schedule Payment Date**, meaning that recalculations are aligned with the payment dates of the lease schedule.
* **Next Variable Interest Change Date** - Calculated automatically by adding the review period defined in the Variable Interest Rate setup to the Initial Variable Interest Rate Date.
* **Variable Interest Rate Last Change Date** - Stores the date when the last successful variable interest rate recalculation was performed. The field is blank for newly created schedules.
* **Variable Interest Last Change Date (Actual)** - Stores the actual processing date when the recalculation function was executed.
* **Variable Interest Rate %** - Displays the current variable interest rate retrieved from the Variable Interest Rates table.
* **Total Interest Rate %** - Calculated automatically as: **Fixed Interest Rate % + Variable Interest Rate %**.
## Schedule Recalculation After Variable Interest Rate Change
When a variable interest rate changes, active lease schedules must be recalculated to reflect the updated financing cost.
This is performed using the **IFRS16 Recalculate Schedule Variable Interest Rate** batch function.
### Recalculation Process
The batch process reviews all lease schedules where:
* Schedule Status = Active
* Version Status = Valid
* Next Variable Interest Change Date falls within the selected processing period.
The processing period can be determined using:
* Work Date
* Current Month
* User-defined date range
When the variable interest rate changes:
* The Effective Monthly Interest Rate is recalculated.
* Future lease payments are discounted using the updated interest rate.
* A new Present Value (PV) is calculated.
Because the lease liability changes, the system automatically performs an amendment process similar to a manual schedule amendment.
Unlike a standard amendment, the new schedule version is created and activated automatically by the recalculation process.
### Recalculation Results
After successful processing:
* A new schedule version is created and activted automatically.
* Variable Interest Rate tracking fields are updated.
* Lease liability adjustment entries are posted.
* Related ROU Asset adjustment entries are posted.
### Recalculation Status Log
If one or more schedules cannot be processed, details are recorded in the **IFRS16 Variable Interest Recalculation Status Review**.
Review the log, correct the identified issues, and run the recalculation process again if required.
