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

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2 The New Leasing Guidance and Its Impact to PeopleSoft Asset Management and Lease Administration Session Loida Chez Product Management Director PeopleSoft Asset Lifecycle Management Solutions July 19, 2017

3 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. 3

4 Agenda Development Phases Configuration Considerations What s Next? Q & A 4

5 Lease Accounting Development Approach Phased Enhancement Rollout (9.2 Only) Phase 1 Foundation Phase 2 Foundation Phase 3 Lessee Phase 4 Migration Transition 5

6 Phases 1 and 2 Preparing the Foundation for New Leasing Guidance Financials Audit Framework Supplemental Data Related Leases and Hierarchy Viewer Lease data import Accounting hierarchy Interunit transfers Lease expiration/asset retirement Interim rent 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 6

7 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 7

8 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 8

9 Financial Terms New rent types enable more precise data capture of financial terms Initial Direct Cost Lease Incentives Prepaid Rent 9

10 Financial Terms 10

11 Financial Terms Initial direct cost is reflected in the right-of-use asset 11

12 Lease Options Related actions to enter lease option payments Penalties Renewal Purchase 12

13 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 13

14 Lease Options Options reasonably certain to be exercised are reflected total lease payments and right-of-use asset 14

15 Leased Assets Add new equipment or property asset Select asset added in Asset Management prior to lease entry 15

16 Leased Assets 16

17 Leased Assets 17

18 Leased Assets Fair value used to determine if purchase option is a bargain 18

19 Leased Assets Residual value included in lease liability 19

20 Allocation of Lease Payments Lease payment allocation basis Manual Percent Price 20

21 Allocation of Lease Payments 21

22 Lease Classification Lease classification determined by asset Classify all assets or one asset at a time 22

23 Lease Classification 23

24 Lease Classification 24

25 Lease Amendments Is the amendment the result of lease remeasurement? 25

26 Lease Amendments 26

27 Lease Amendments 27

28 Configuration Considerations Lease Administration Lease Classification, Borrowing Rate, Miscellaneous Rent, and Lease Options 28

29 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 29

30 Borrowing Rate Optionally Configure a Default Incremental Borrowing Rate 30

31 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 31

32 Lease Options Renewal, Penalties, and Purchase Options Valid option types Renewal Purchase Penalties Other 32

33 Configuration Considerations Asset Management Asset Categories and Profiles 33

34 Asset Categories Finance versus Operating Finance Lease Categories = Depreciable Operating Lease Categories = Non-Depreciable 34

35 Asset Profiles Finance versus Operating Finance Lease Profiles = Capitalized Asset Operating Lease Profiles = Capitalized Asset 35

36 Asset Profiles Finance versus Operating Finance Lease Profiles = Depreciable Operating Lease Profiles = Non-Depreciable 36

37 Configuration Considerations Accounting Hierarchy 37

38 Lease Accounting Hierarchy Highest level in default hierarchy AM Accounting Entry Templates LA Accounting Rules CF Override 38

39 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) 39

40 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 40

41 What s Next? 46

42 Lease Accounting Development Approach Phased Enhancement Rollout (9.2 Only) Phase 1 Foundation Phase 2 Foundation Phase 3 Lessee Phase 4 Migration Transition 47

43 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 48

44 Q&A 49

45 MW Get Connected and Stay Informed Key PeopleSoft Information Sources Oracle PeopleSoft Page Oracle PeopleSoft Development Group Blogs 50

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