The New Leasing Guidance and Its Impact to PeopleSoft Asset Management and Lease Administration Session 101160 Loida Chez Product Management Director PeopleSoft Asset Lifecycle Management Solutions July 19, 2017
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Agenda 1 2 3 4 Development Phases Configuration Considerations What s Next? Q & A 4
Lease Accounting Development Approach Phased Enhancement Rollout (9.2 Only) Phase 1 Foundation Phase 2 Foundation Phase 3 Lessee Phase 4 Migration Transition 5
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
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
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
Financial Terms New rent types enable more precise data capture of financial terms Initial Direct Cost Lease Incentives Prepaid Rent 9
Financial Terms 10
Financial Terms Initial direct cost is reflected in the right-of-use asset 11
Lease Options Related actions to enter lease option payments Penalties Renewal Purchase 12
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
Lease Options Options reasonably certain to be exercised are reflected total lease payments and right-of-use asset 14
Leased Assets Add new equipment or property asset Select asset added in Asset Management prior to lease entry 15
Leased Assets 16
Leased Assets 17
Leased Assets Fair value used to determine if purchase option is a bargain 18
Leased Assets Residual value included in lease liability 19
Allocation of Lease Payments Lease payment allocation basis Manual Percent Price 20
Allocation of Lease Payments 21
Lease Classification Lease classification determined by asset Classify all assets or one asset at a time 22
Lease Classification 23
Lease Classification 24
Lease Amendments Is the amendment the result of lease remeasurement? 25
Lease Amendments 26
Lease Amendments 27
Configuration Considerations Lease Administration Lease Classification, Borrowing Rate, Miscellaneous Rent, and Lease Options 28
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
Borrowing Rate Optionally Configure a Default Incremental Borrowing Rate 30
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
Lease Options Renewal, Penalties, and Purchase Options Valid option types Renewal Purchase Penalties Other 32
Configuration Considerations Asset Management Asset Categories and Profiles 33
Asset Categories Finance versus Operating Finance Lease Categories = Depreciable Operating Lease Categories = Non-Depreciable 34
Asset Profiles Finance versus Operating Finance Lease Profiles = Capitalized Asset Operating Lease Profiles = Capitalized Asset 35
Asset Profiles Finance versus Operating Finance Lease Profiles = Depreciable Operating Lease Profiles = Non-Depreciable 36
Configuration Considerations Accounting Hierarchy 37
Lease Accounting Hierarchy Highest level in default hierarchy AM Accounting Entry Templates LA Accounting Rules CF Override 38
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
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
What s Next? 46
Lease Accounting Development Approach Phased Enhancement Rollout (9.2 Only) Phase 1 Foundation Phase 2 Foundation Phase 3 Lessee Phase 4 Migration Transition 47
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
Q&A 49
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