IS YOUR LEASE SOLUTION FASB READY? It s here!

Transcription

1 IS YOUR LEASE SOLUTION FASB READY? It s here!

2 Hello! Jaron Banks Sr. Sales Engineer Accruent Chris Smart Manager, Product Management Accruent Accruent Confidential and Proprietary

3 Agenda Brief background summary Effective dates Product functionality Supported platforms Upcoming accounting events 3

4 HOW DID WE GET HERE?

5 How did we get here? Timeline of lease project Memorandum of Understanding FASB & IASB Discussion Paper, Leases: Preliminary Views Original Exposure Draft Issued (Aug. 10 th ) Revised Exposure Draft Issued (May 16 th ) Comment Period Ended New Standard Issued

6 ROI Analysis Benefits Costs Eliminates off-balance sheet financing Improved comparability Financial position of lessee accuracy Improvement for prepares Implementation costs: Personnel costs to evaluate existing leases Implementation costs: Internal educational costs Implementation costs: Inputs available due to footnote requirement Recurring costs for sustaining 6

7 FASB s Dual Model Balance Sheet Income Statement Cash Flows Finance Right-of-use asset & Lease liability Amortization expense Interest expense Cash paid for P&I payments Operating Right-of-use asset & Lease liability Single lease expense straight line basis Cash paid for lease payments 7

8 FASB Update 8

9 UPCOMING DATES

10 Effective Dates Transition period Public adoption Private adoption Present comparative periods using modified retrospective method Fiscal years beginning after December 15 th Fiscal years beginning after December 15 th 10

11 PRODUCT FUNCTIONALITY

12 What can we do? Transition Maintain Analyze 12

13 What can we do? ASC 842: Transition Does it meet any of the following: Transfer of ownership Reasonable certain option to purchase Lease term is a major part of economic life Present value of lease payments is substantially all of the fair value Transfer Leases Interest Rate Lease Classification Initial Measurement 13

14 PRODUCT DEMO

15 Lessee Accounting Finance Operating Liability measured at present value Front loaded expense Right-of-use asset initially measured at cost Right-of-use asset generally amortized on straight-lined basis Liability measured at present value of remaining lease payments Straight-lined expense Measure right-of-use asset at amount of lease liability and adjust Recurring costs for sustaining 15

16 Example lease Description Lease term Economic life Purchase option Rent payments Details 10 years (no renewal option) 39 years None $1,000, escalating 5% every year Interest rate 5.0% Initial cost Residual value guarantee None None 16

17 Example Balance sheet, beginning of year Operating lease Finance lease Right-of-use asset 116, , Lease liability (116,232.90) (116,232.90) Income statement Lease expense 1, Amortization Interest expense Income before tax (1,257.79) ( ) Cash flow statement Operating activities (1,000) (484.30) Investing activities Financing activities (515.70) Balance sheet, end of year 1 Right-of-use asset 106, , Lease liability (109,308.66) (109,308.66) 17

18 What can we do? ASC 842: Maintain Leases required to adopt new standards following transition: Existing leases at transition New leases commenced during transition Leases changed in classification Specified reliefs Subsequent Measurement Lease Payments Variable Lease Payments In-Substance Fixed Payments 18

19 What can we do? ASC 842: Analyze Lessees will be recording almost every lease on the balance sheet as either: Finance (Type A) Operating (Type B) Portfolio Management Portfolio Analysis Reporting GL Integration 19

20 What are we continue to work on? IASB client validation Bulk import tools Finalizing all scenarios Enhancing user experience Audit data archiving 20

21 Accruent Timeline LA Cloud 16.2 Release Accounting Reports FASB Lease Standards Released 8.6 Release Includes Accounting Update LA Cloud Release Includes Accounting Update Release Includes Accounting Update Release Includes Accounting Update Q Q Q Q Final Development 21

22 How do we get there? Supporting versions of lease accounting compliance Lease accounting Lease accounting 8.6 Lease accounting LA Cloud Lease accounting Key date notifications Bulk variable expense import Chrome compatibility Property APIs available Enhanced reporting universe IE11 compatibility Business objects upgrade all previous enhancements (less BOBJ) 22

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