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
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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
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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
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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
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Decisions and Events Across the Lifecycle
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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
Real Estate Real Estate
Equipment
Page 25© 2017 LeaseAccelerator Inc.
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
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Straight Through Processingglobalthelessor network
ENTERPRISE LEASE MANAGEMENT
• Asset Management• Mid-Term Buyouts and Returns• End of Term Buyouts, Returns, Renewals• Evergreen Reporting• Stakeholder Scorecard
ENTERPRISE LEASE ACCOUNTING
• 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
Page 27© 2017 LeaseAccelerator Inc.
Lease Accounting Software
THANK YOUQUESTIONS?
LeaseAccelerator LeaseAccelerator @LeaseAccelerate LeaseAccelerator
www.leaseaccelerator.com