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Quick Take – First Step – Identifying Your Leased Assets

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Preparing for the new Lease Accounting changes with PeopleSoft Lease Administration

In a previous blog I discussed the high level steps to prepare for the new lease accounting changes. In this blog I will be focusing on the first step, identifying your leased assets. The reason for the deeper dive on this step is that I have seen a common theme across several organizations: Leasing assets is highly decentralized and how the leased assets are being tracked is not the same across all departments. The visibility to the list of leased assets and the related liabilities is not always clear.

The entire process of moving to the new lease accounting standards will require planning, budgeting, modifying business processes, adapting to new software, etc. as outlined in my previous blog. A critical step that your organization can easily do is to build your list of leased assets now. Regardless of your organization’s overall approach, doing this step now will prevent any unnecessary delays once your overall transition plan is in place.

In its current state, your leased asset data is more than likely just focused on the information needed to support payments & invoices and not necessarily all the asset data that will be needed to support the new accounting standards. Pulling together a list of these assets will take some planning and effort; however, it should all be readily available. A first pass approach should be to pull together the list of information that is already being tracked. Then with a second pass, add the new information required for the accounting standards change.

A quick list of the new information needed will include:

Asset Classifications:

  • Ownership Transfer to Lessee (Y/N)
  • Purchase Option Reasonably Certain of Exercise (Y/N)
  • Highly Specialized Customer Specific Asset (Y/N)
  • Lease Term for Major Part of the Asset Useful Life (Y/N)
  • Lease Payments Substantially All Asset Fair Value (Y/N)

Financial Term Information:

  • Lease Start Date
  • Lease End Date
  • Initial Direct Costs
  • Lease Incentives
  • Lease Options
  • Rent vs Operating Expense (cost breakdown and implied interest rates for present value calculations)

Asset information:

  • Asset Profiles
  • Asset Category
  • Asset Fair Value at Lease Inception
  • Asset Fair Value at End of Lease
  • Guaranteed Residual Value
  • Estimated Asset Useful Life

In conclusion, this quick take and deeper dive for building your leased asset list should give your organization a solid jump start and this will ensure that your organization has the necessary data ready when you begin the transition to the new accounting standards.

Thank you for reading and be sure to read my other Lease Administration Blogs.

Steven Brenner, CPA
Senior Principal Consultant
MIPRO Consulting

PeopleSoft Lease Administration Quick Take

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 A Few of My Favorite New Lease Administration Features Released in v9.2

PeopleSoft Lease Administration will soon be completing the final changes for ASC 842/IFRS 16 compliance and I will be covering that topic in later blogs. In the meantime, I would like to do a quick take and point out a few of my favorite features that PeopleSoft Lease Administration has released along the way with v9.2.

My first favorite feature is Related Lease Types. In prior versions, Related Lease functionality was limited to linking leases thru a Parent Lease field only. In v9.2, an additional Related Lease field was added that allows for leases to be linked together with user defined Related Lease Types. This provides an additional reporting element for linking and tracking leases.

Displayed below is a screen shot of the new Related Leases page. At the top is the Parent/Child section and at the bottom is the new Related Leases section. As illustrated, leases can now be linked together using multiple criteria – a big plus for reporting purposes.

My next new favorite feature is the Payment Group feature. This now provides the capability to control how vouchers & invoices will be grouped together and displayed on the payment & invoice advices. Prior to this recent v9.2 update, the payment detail was not available at the advice level and this new feature now automatically provides landlords & tenants with that important payment breakdown directly on the advice.

Below is a screen shot of the Financial Terms page with 3 terms: Base Rent, Misc Rent – Storage Fees and Operating Expenses. By using the 2ndcolumn for Payment Groups, additional payment breakdown can now be provided on the advice. This provides a good foundation when tailoring payment advices & invoices to meet your requirements.

Lastly, my next favorite feature that was just released is the Integration Check Box. Often times a lease may not be setup in Lease Administration until several months after the lease has been active and payments have already been made. This new feature allows you to add those financial terms to your leases, keep all your lease data intact and prevent those previously made payments from being interfaced to accounts payable (or invoices for accounts receivable).

The screen shot below shows the Base Rent Details page. For any amounts that have already been paid, simply turn off the check box. Then for all future payments keep the check box on. This makes accommodating those previously made payments easy to manage and keeps your lease data complete. The best part is no technical assistance required! It is all user controlled.

Whether you are on an early version of 9.2 or on v9.1 or 9.0, I just wanted to take a few minutes to discuss a few of my favorite new Lease Administration features. Overall, PeopleSoft Lease Administration has released many new features in v9.2. I certainly could have mentioned a dozen more but this blog is just a quick take on a few of my favorites. In my upcoming blogs, I will begin to take a deeper dive on the new upcoming accounting lease standards so stay tuned.

Thank you for reading,

Steven Brenner, CPA
Senior Principal Consultant
MIPRO Consulting

New ASC 842 Leased Assets Federal Requirements – Are You Ready?

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How is your organization preparing for the upcoming Lease Accounting changes that will take effect in 2019 for public companies and in 2020 for private companies? The time is fast approaching and organizations will also need to restate prior year statements as well. Have you created a transition approach? PeopleSoft is well under way to updating Lease Administration to meet the new accounting standards and the latest version is available now to assist your organization in the transition. This blog will cover the necessary high level steps needed to transition your organization’s lease & asset data from the current accounting standards to the upcoming standards.

PeopleSoft’s roadmap to update Lease Administration is in the following 4 phased approach. With Lease Administration phase 3 now officially available in PUM 24, organizations can now begin tracking their leased asset data with the new data requirements. Then when Phase 4 is available and the new lease accounting standards take effect, organizations can be fully ready.

 

Given these upcoming lease accounting changes, what can your organizations do now to be fully prepared when those changes take effect?

  1. Identify all your leases and identify all the related assets for those leases. In many organizations managing leased assets is decentralized, so the first key step is to consolidate those lists now and have all your leases and related assets on a single list. Align the upcoming accounting standards to all your leased assets. Under the current accounting standards, you may not be tracking all the underlying asset data needed to support the new accounting standards such as useful life, asset category and residual value, etc. All this newly required asset information can now be stored in PeopleSoft Lease Administration and be fully available when the new accounting standards take effect. By assembling this information now, your organization will have all the required data it needs in place to start assessing the impacts on its financial statements.
  2. Next is know your business processes. Under the current accounting standards your organization is probably only gathering the lease & asset data that is needed to facilitate payments. But looking ahead you will need to expand the lease & asset data that you track. For most organizations, this should not be a big factor and can be simply addressed by adjusting the current business process to accommodate the new data elements. For some organizations, this might require moving from a decentralized to centralized business process model and this scenario will require a bit more effort. The key here is to leverage your current business process, create a baseline for your current data and then build a transition a plan for the new process model.
  3. Now that your new lease & asset data is in place and your business processes defined, you will now be ready to begin working with the latest updates in PeopleSoft Lease Administration. To support the new accounting standards, Lease Administration is being designed to provide all the required journal entries for capitalizing your leased assets, creating the associated liabilities, recording depreciation and amortization as required and drawing down the liabilities. As part of the transition your organization will need to understand its current general ledger balances for the underlying assets & liabilities, and then understand how those balances will be impacted when the new standards take effect.
  4. Know your reporting requirements. PeopleSoft Lease Administration will provide delivered reports to support the upcoming changes. By understanding your organization’s specific reporting requirements, this will allow your organization to best tailor these reports to meet its needs.

In closing, as your organization begins preparing for the new lease accounting standards, transitioning to the new standards at first may seem a bit intimidating. However, through proper planning and using the above steps as a guide, your organization will be fully prepared for this transition.

Thank you for reading and be sure to read our other Lease Administration Blogs.

Steven Brenner, CPA
Senior Principal Consultant
MIPRO Consulting

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