LEASE ACCOUNTING FOR ORACLE ERP USERS .ENTERPRISE LEASE ACCOUNTING LEASE ACCOUNTING FOR ORACLE ERP

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  • www.leaseaccelerator.com

    THE LEADER IN ENTERPRISE LEASE ACCOUNTING SOFTWARE

    ENTERPRISE LEASE ACCOUNTING

    LEASE ACCOUNTING FOR ORACLE ERP USERS

    MICHAEL KEELERCEO and Founder

    ALEX KLEINLease AccountingSolution Consultant

  • 2www.leaseaccelerator.com

    ENTERPRISE LEASE ACCOUNTING

    Comply with the new lease accounting standards while achieving savings on sourcing and management of your portfolio.

    ENTERPRISE LEASE ACCOUNTING

    WHAT IS LEASE ACCOUNTING?

  • Page 3 2017 LeaseAccelerator Inc.

    New FASB ASC 842 Standard

    Published in February 2016

    Lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months

    Classification as a finance or operating lease

    Both types of leases to be recognized on the balance sheet

    Qualitative and quantitative disclosures required for amount, timing and uncertainty of cash flows arising from leases

  • Page 4 2017 LeaseAccelerator Inc.

    Time-box is Shrinking for Controllerships

    Q4Q3Q2Q1Q4Q3Q2Q1

    SOX 404Lockdown

    2017 2018

    Time-box:Lease

    Accounting Project

    TransitionDeadline

    1 2 3 4 5

  • Page 5 2017 LeaseAccelerator Inc.

    Enterprise Lease Accounting

    Sarbanes-Oxley Audit

    Real Estate Leases

    Equipment Leases

    Embedded Leases

    Substantive AuditFinancialReporting

    Income Statement

    Balance Sheet

    Qualitative Disclosures

    SystemsLease AccountingLease Administration

    Processes

    New LeaseQuarter EndYear End

    ControlsLease versus BuyInvoice Approval

  • Page 6 2017 LeaseAccelerator Inc.

    Accurate Calculations

    Lease AccountingSub-Ledger

    Auto-Lease Classification

    Global LeaseAccounting Engine

    General LedgerConfiguration

    Responsibility &Management

    Accounting

    FinancialDisclosures &

    Reporting

    Real Estate Leases

    Equipment Leases

  • Page 7 2017 LeaseAccelerator Inc.

    Accounting Classification Analysis

    ASC 840

    Classification Criteria

    ClassificationCriteria

    ClassificationCriteria

    ClassificationCriteria

    Current StandardUS GAAP

    IAS 17Current Standard

    International

    ASC 842New Standard

    US GAAP

    IFRS 16New StandardInternational

    Short Term LeaseNon-Cancellable90% of Lease Payments75% of Economic LifeOwnership TransferBargain Purchase

    Short Term LeaseNon-CancellablePV of Lease PaymentsEconomic LifeOwnership TransferBargain PurchaseSpecialized Assets

    Short Term LeaseNon-CancellablePV of Lease PaymentsEconomic LifeOwnership TransferLikely PurchaseSpecialized Assets

    Short Term LeaseNon-CancellableOwnership TransferInterrelated AssetsSmall Value

    Automatically generates recommended classification with option to override

  • Page 8 2017 LeaseAccelerator Inc.

    Enterprise Lease Accounting Project Scope

    System Configuration

    Data Collection

    Change Management

    Accounting Policy

    Impact Assessment

    Process transformationrequired

  • Page 9 2017 LeaseAccelerator Inc.

    Why Three Processes?

    Journal Entries

    Business Processes and Controls

    Asset and Payment Dynamics

    Calculations

    Stakeholders

    Data

    Motivations & Objectives

    Culture

    Unique to lease type Real Estate Equipment Embedded LeasesTransaction Lifecycle

  • Page 10 2017 LeaseAccelerator Inc.

    Transition Accounting: Top Audit Risk

    840

    842D

    842

    LEAS

    E AC

    COU

    NTI

    NG

    SUB

    -LED

    GER

    S

    842E

    Date of InitialApplication

    Ex: 1/1/2017

    EffectiveDate

    Ex: 1/1/2019

    True-Up

    Re-Measure

    EffectiveAdjusting Entries

    TransitionEntries

    May Continue to support Frozen GAAP requirements

    Continues to Support Comparative Reporting Disclosures

    Primary Journal Entries uploaded to GL

    Primary Journal Entries uploaded to GL

    Changes inEstimates Applied

    Re-Measure

    DOIA

    EffectiveDate

    840 Entries

    842 Entries

    842D Entries

    What ifAnalysis

  • Page 11 2017 LeaseAccelerator Inc.

    Auditor Checklist: Need Asset Level Controls

    Assertions LeaseAccelerator Control Features

    Completenessand Accuracy

    Automated Data Capture and Validation Straight-Through Processing Roll-Forward Reporting

    Existenceor Occurrence

    Deal History Document and Communications History Asset Attestations

    Rights and Obligations

    Detail Lease Terms Date Tracking (i.e., commencement, acceptance, booking, funding, original end, effective end)

    Valuation or Allocation

    Policy Settings (i.e., IBR, Reasonably Certain Holding Period, Reasonably Certain EOT Option, Classification Test Thresholds)

    Asset Based Rule-Based Accounting Engine (ROU Asset Adjustments, Modifications) Embedded PV Calculations (Frequency, Adv/Arr)

    Presentation and Disclosure

    GL Configuration and Account Setup Detail Classification Testing

    Authorization Audit Trail, Access Level, Scope of Access, and Segregation of Duties Workflow

  • Page 12 2017 LeaseAccelerator Inc.

    Asset level vs. Contract level

    Contract-LevelLease Accounting

    Asset-LevelLease Accounting

    Debits and Credits for each Lease

    Contract

    Debits and Credits for each Leased Asset

    Lease Contract

    LeasedAsset

    LeasedAsset

    LeasedAsset

  • Page 13 2017 LeaseAccelerator Inc.

    Asset level vs. Contract level

    Contract-LevelLease Accounting

    Asset-LevelLease Accounting

    Lease Contract

    LeasedAsset

    LeasedAsset

    LeasedAssetALLOCATION

    AGGREGATION

  • Page 14 2017 LeaseAccelerator Inc.

    What is Asset-Based Lease Accounting?

    Mid-Term EventsLocation Changes

    Tax Timing DifferencesReassessments

    ModificationsUsage ParameterizationNon-Lease Components

    PenaltiesResidual Guarantee

    Purchase OptionTerm

    Partial End of Term Events

    FINANCE AND TAXACCOUNTING

    AND COMPLIANCE Super-Asset AggregationCost Center AllocationProject AllocationMergers & Acquisition AllocationReorganization Allocation

    MANAGEMENTACCOUNTING ANDLEASE COMPLIANCE

    Negotiating Equipment BuyoutsNegotiating Equipment RenewalsNegotiating Equipment ReturnsAggregated Spend

    DRIVINGSAVINGS

  • Page 15 2017 LeaseAccelerator Inc.

    Every Asset is a Lease

    At End of Term: Partial EventsAt Inception: Varying Lives

    Fort

    Wor

    th

    48-Month Term

    Arlin

    gton

    60-Month Term

    Fort

    Wor

    th

    Return Renew

    Arlin

    gton

    Return Buyout Renew

  • Page 16 2017 LeaseAccelerator Inc.

    Varying Start Dates for Equipment LeasesAssets 1-8 Assets 9-10

    AMORTIZATIONSCHEDULE

    PAYMENTSCHEDULE

    DEPRECIATIONSCHEDULE

    August September October November December January

    AssetsAvailable

    AssetsAvailable

    LeaseStart Date

    AssetsIn-Service

    AssetsIn-Service

  • Page 17 2017 LeaseAccelerator Inc.

    Decisions and Events Across the Lifecycle

  • Page 18 2017 LeaseAccelerator Inc.

    Modifications and Reassessments

    LEASEACCOUNTING

    Change inCircumstances

    ContractualEvent

    Exercise anOption

    LeaseholdImprovements

    AssetChanges

    BusinessDecision

    Index or RatePayments

    Lease PaymentContingency

    Residual Value Guarantee

  • Page 19 2017 LeaseAccelerator Inc.

    Audit Trail for Each Lease

    Asset Request Form submitted from APAC IT Organization

    Lease versus Buy analysis completed and stored

    Indicative lease classification ASC 840 completed

    Master Lease Agreement and schedule received

    Treasury signed MLA and returned to lessor

    Lease schedule details entered into systems

    Schedule and MLA document attached to lease in system

    Asset Manifest details for equipment received entered into system

    Certificate of Acceptance created and accepted

    First rent payment scheduled

    Lease classification for ASC 840 & 842 (and/or IFRS 16 & IAS 17)

    New lease booked into the system

  • 20www.leaseaccelerator.com

    ENTERPRISE LEASE ACCOUNTING

    Comply with the new lease accounting standards while achieving savings on sourcing and management of your portfolio.

    ENTERPRISE LEASE ACCOUNTING

    ENTERPRISE LEASE ACCOUNTING SOFTWARE

  • Page 21 2017 LeaseAccelerator Inc.

    Some Companies Have No Systems Today

    LEASEACCOUNTING

    ERP APPLICATIONS

    GeneralLedger

    AccountsPayable

    GeneralLedger

    AccountsPayable

    LEASEADMINISTRATION

    Real Estate Real Estate

    EquipmentEquipment

  • Page 22 2017 LeaseAccelerator Inc.

    What Most Companies Have Today

    LEASEACCOUNTING

    ERP APPLICATIONS

    GeneralLedger

    AccountsPayable

    GeneralLedger

    AccountsPayable

    LEASEADMINISTRATION

    Real Estate Real Estate

    EquipmentEquipment

  • Page 23 2017 LeaseAccelerator Inc.

    LeaseAccelerator A Complete Solution

    ERP APPLICATIONS

    GeneralLedger

    AccountsPayable

    GeneralLedger

    AccountsPayable

    LEASEACCOUNTING

    LEASEADMINISTRATION

    Equipment

    Real Estate

    Equipment

    Real Estate

  • Page 24 2017 LeaseAccelerator Inc.

    Or LeaseAccelerator Can Fill the Gaps

    ERP APPLICATIONS

    GeneralLedger

    AccountsPayable

    GeneralLedger

    AccountsPayable

    LEASEACCOUNTING

    LEASEADMINISTRATION

    Equipment