The New Leasing Guidance and Its Impact to PeopleSoft...

The New Leasing Guidance and Its Impact to PeopleSoft Asset Management and Lease Administration

Loida Chez Product Management Director PeopleSoft Asset Lifecycle Management Solutions July 19, 2017

Session 101160

Safe Harbor Statement

The following is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for Oracle’s products remains at the sole discretion of Oracle.

Agenda

Development Phases

Configuration Considerations

What’s Next?

Lease Accounting Development Approach Phased Enhancement Rollout (9.2 Only)

Phase 1 – Foundation

Phase 3 – Lessee

Phase 4 – Migration Transition

Phases 1 and 2

• Financials Audit Framework

• Supplemental Data

• Related Leases and Hierarchy Viewer

• Lease data import

• Accounting hierarchy

• Interunit transfers

• Lease expiration/asset retirement

• Interim rent

Preparing the Foundation for New Leasing Guidance

• Equipment leasing

• Finance/capital payables leases

• Lease classification assistant

• Enhanced integration with Asset Management

- ChartField transfers

- Recategorization

- Asset cost adjustments

- Asset life update/book change

Non -Exhaustive

Phase 3

Payables Lease Extensions for ASC 842 and IFRS 16

• Multi-asset leases • More precise data

capture of financial terms

• Allocation of lease payments

• Asset-level lease classification and accounting

Financial Terms

Total Lease Payments = Unpaid Lease Payments + Payments Due at End of Lease ROU Asset Cost = Present Value of Lease Payments + Initial Direct Cost + Prepaids – Lease Incentives Received

Financial Terms

New rent types enable more precise data capture of financial terms

• Initial Direct Cost • Lease Incentives • Prepaid Rent

Financial Terms

Initial direct cost is reflected in the right-of-use asset

Lease Options

Related actions to enter lease option payments

• Penalties • Renewal • Purchase

Lease Options

• Associate option to an underlying asset in a lease

• Evaluate if purchase option is bargain with percentage of fair value calculation

• Establish if option is reasonably certain to be exercised

Lease Options

Options reasonably certain to be exercised are reflected total lease payments and right-of-use asset

Leased Assets

• Add new equipment or property asset • Select asset added in Asset Management

prior to lease entry

Leased Assets

Fair value used to determine if purchase option is a bargain

Leased Assets

Residual value included in lease liability

Allocation of Lease Payments

Lease payment allocation basis • Manual • Percent • Price

Allocation of Lease Payments

Lease Classification

• Lease classification determined by asset

• Classify all assets or one asset at a time

Lease Amendments

Is the amendment the result of lease remeasurement?

Lease Amendments

Configuration Considerations Lease Administration – Lease Classification, Borrowing Rate, Miscellaneous Rent, and Lease Options

Lease Administration Business Unit

What is Your Organization’s Accounting Policy for Lease Classification?

• If FASB BU, define - ‘major part’ of remaining

economic life of leased asset

- ‘substantially all’ of the fair value of the underlying asset

• Percentage of fair value considered bargain purchase (optional)

• If IFRS BU, all payables leases are finance

Borrowing Rate Optionally Configure a Default Incremental Borrowing Rate

Miscellaneous Rent Types Initial Direct Cost, Prepaid Rent, and Miscellaneous Recurring Rent

New rent type identifier • Initial Direct Cost • Other

If rent type is ‘other’ specify if rent is • Included in lease

payments • Interim or prepaid rent

Lease Options Renewal, Penalties, and Purchase Options

Valid option types • Renewal • Purchase • Penalties • Other

Configuration Considerations Asset Management – Asset Categories and Profiles

Asset Categories Finance versus Operating

Operating Lease Categories = Non-Depreciable

Finance Lease Categories = Depreciable

Asset Profiles Finance versus Operating

Operating Lease Profiles = Capitalized Asset

Finance Lease Profiles = Capitalized Asset

Asset Profiles Finance versus Operating

Operating Lease Profiles = Non-Depreciable

Finance Lease Profiles = Depreciable

Configuration Considerations Accounting Hierarchy

Lease Accounting Hierarchy

AM Accounting Entry Templates

LA Accounting Rules

CF Override

Highest level in default hierarchy

Asset Management Accounting Entry Templates Evaluate Existing and Create New

• Review accounting entry templates for existing lease asset categories

• Create new accounting entry templates for new

- Asset categories - Cost types

Lease Incentive Lease Remeasurement Rent Expense

- Lease Expense Transaction Type (LEX)

Lease Accounting Rules Evaluate Existing and Create New

• Review existing transaction routing codes and LA accounting rules for existing transaction groups

• Evaluate if new LA accounting rules are needed for new transaction groups

- Lease Obligation - Lease Interest Expense - Prior Period Lease Obligation - Prior Period Interest Expense - Rent Expense - Lease Incentive

What’s Next?

Lease Accounting Development Approach Phased Enhancement Rollout (9.2 Only)

Phase 4 – Migration Transition

Phase 3 – Lessee

What does all this mean for me?

• Asset Management and Lease Administration Licensed Customers

– No additional licenses needed; additional planned functionality already included

• Asset Management Only Customers – Evaluate your lease portfolio. You may want to consider licensing and implementing

Lease Administration for all asset types (including properties), lessee/lessor, and advanced leasing capabilities

Key PeopleSoft Information Sources

Get Connected and Stay Informed

www.peoplesoftinfo.com

www.peoplesoftinfo.com www.peoplesoftcfotool.com www.peoplesoftvfos.com

@PeopleSoft_Info Oracle PeopleSoft Development Group

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