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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


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


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


Time-box is Shrinking for Controllerships

Q4Q3Q2Q1Q4Q3Q2Q1

SOX 404Lockdown

2017 2018

Time-box:Lease

Accounting Project

TransitionDeadline

1 2 3 4 5


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


Accurate Calculations

Lease AccountingSub-Ledger

Auto-Lease Classification

Global LeaseAccounting Engine

General LedgerConfiguration

Responsibility &Management

Accounting

FinancialDisclosures &

Reporting

Real Estate Leases

Equipment Leases


Accounting Classification Analysis

ASC 840

Classification Criteria

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


Enterprise Lease Accounting Project Scope

System Configuration

Data Collection

Change Management

Accounting Policy

Impact Assessment

Process transformationrequired


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


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


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


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


Asset level vs. Contract level

Contract-LevelLease Accounting

Asset-LevelLease Accounting

Lease Contract

LeasedAsset

LeasedAsset

LeasedAssetALLOCATION

AGGREGATION


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


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


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


Decisions and Events Across the Lifecycle


Modifications and Reassessments

LEASEACCOUNTING

Change inCircumstances

ContractualEvent

Exercise anOption

LeaseholdImprovements

AssetChanges

BusinessDecision

Index or RatePayments

Lease PaymentContingency

Residual Value Guarantee


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


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


ENTERPRISE LEASE ACCOUNTING SOFTWARE


Some Companies Have No Systems Today

LEASEACCOUNTING

ERP APPLICATIONS

GeneralLedger

AccountsPayable

GeneralLedger

AccountsPayable

LEASEADMINISTRATION

Real Estate Real Estate

EquipmentEquipment


What Most Companies Have Today

LEASEACCOUNTING

ERP APPLICATIONS

GeneralLedger

AccountsPayable

GeneralLedger

AccountsPayable

LEASEADMINISTRATION


EquipmentEquipment


LeaseAccelerator – A Complete Solution

ERP APPLICATIONS

GeneralLedger

AccountsPayable

GeneralLedger

AccountsPayable

LEASEACCOUNTING

LEASEADMINISTRATION

Equipment

Real Estate

Equipment

Real Estate


Or LeaseAccelerator Can Fill the Gaps

ERP APPLICATIONS

GeneralLedger

AccountsPayable

GeneralLedger

AccountsPayable

LEASEACCOUNTING

LEASEADMINISTRATION

Equipment


Equipment


Enterprise Lease Accounting

Enterprise LeaseAccounting

• Book Accounting• Tax Accounting• Cash Flow Management• Financial Planning• Invoice Workflow

Equipment Lease Management• Moves, Adds and Changes• End of Term Workflows• Evergreen Reporting

Real Estate Lease Administration• Lease Data & Documents• Critical Date Management• Accounts Payable

Vendor Captive

CommercialBank

IndependentLessor

ExternalSystems

General Ledger Accounts PayableFixed AssetProcurement Sourcing Contract Management

Equipment Lease Sourcing

• Lease vs Buy Analysis• RFP Generation• Competitive Bidding• Proposal Ranking• Data Abstraction

FleetManagement

IT Asset Management

Real EstateManagement


Straight Through Processingglobalthelessor network

ENTERPRISE LEASE MANAGEMENT

• Asset Management• Mid-Term Buyouts and Returns• End of Term Buyouts, Returns, Renewals• Evergreen Reporting• Stakeholder Scorecard


• Global Lease Accounting Engine• Lease Accounting Sub-Ledger• New and Current Lease Standards• Book Accounting and Tax Accounting• Cash Flow Management

Moves, Adds, Changes End of Term

General Ledger Accounts PayableFixed Asset

Payment Details & Instructions

What was Paid

Journal EntriesAmounts Due

Allocations

Corporate HierarchyGL Codes

Cash DisbursementAsset Debits

& Credits

Procurement Sourcing Contract Management

Purchase RequestPurchase Order

Cost CenterGovernance

Equipment DescriptionModel Number

Number of UnitsEquipment Cost

Hyperlinks toMLAs, Schedules,

Renewals

Vendor Captive

CommercialBank

IndependentLessor

Asset Data &Warranty

RFPs & BidsLease Data &Documents

ENTERPRISE LEASE SOURCING

• Lease vs Buy Analysis• Leasing RFP Generation• Competitive Bidding on Global Lessor Network• Proposal Ranking and Ranking• Data and Document Collection

FleetManagement

IT Asset Management

Real EstateManagement

Swaps & UpgradesMoves, Adds, Changes

End of Term: Returns, Buyouts, Renewals

iPROCUREMENT


Lease Accounting Software

THANK YOUQUESTIONS?

LeaseAccelerator LeaseAccelerator @LeaseAccelerate LeaseAccelerator

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