1. Transitioning Leases to the New Accounting Standard
Steven Brenner, CPA
Senior Principal Consultant
MIPRO Consulting
July 18, 2018

2. Presenters Steven Brenner, CPA – Senior Principal Consultant
20 years PeopleSoft implementation experience
25 years finance & accounting experience
7 years specializing in lease administration
(M)

3. Presenters Larry Zagata – Managing Partner, VP Delivery
25 years Information Technology Experience
19 years PeopleSoft Experience
9 years at PeopleSoft
(M)

4. Agenda Introductions Presentation Goals Lease Accounting Discussion
How MIPRO can help
Q&A

5. Presentation Goals
Provide a walk-through of 842 accounting entries with Lease Administration
Lease Administration walk- through

6. Getting Your Data Ready

7. Moving From 840 to 842 Lease Accounting Rules
Getting your data ready:
Know the 842 valuation of your leases before conversion at your target conversion date
This will provide the reconciling target balances
Identify your cutover dates for converted data
Plan your testing cycles
Most testing cycles will be monthly - understand your reporting requirements
Leased Asset accounting entries will be created by Asset Management which includes entries to a clearing account which is then cleared when vouchers are posted to accounts payable
Adjust your reporting requirements accordingly

8. Lease Accounting Discussion

9. Sample Lease Data Lease dates – Monthly payments - $10,000,
Start date - 1/1/2018
End date - 12/31/2028
Monthly payments - $10,000,
Payments escalating $1,000 per year starting 1/1/2019
Interest rate – 5%
Operating expenses - $2,000 to $3,000 per month
Lease Accounting examples to include an Operating Lease and Finance Lease under both the 840 and 842 accounting rules

10. Sample Lease Data

11. ASC 840 – Operating Lease Accounting entries repeat for every month
Straight-line entries adjust each year and the Def/Accr balance is the only amount on the balance sheet

12. ASC 842 – Operating Lease
Asset & Liability balances are now on the balance sheet. Valued at the PVLP
The monthly expense reflects the straight-line amount and is created by 2 separate journal entries
Both the machinery & equipment account and the liability account are adjusted downward each month as per the amortization table
The voucher interfaced to accounts payable debits a clearing account which balances out the monthly lease entries. In this example account was used as the clearing account

13. Sample Lease Data

14. ASC 842 – Finance Lease Similar to 840 Capital Leases
Asset & Liability balances are on the balance sheet. Valued at the PVLP
The monthly expense is broken down into 2 components: a straight-line amount of the PVLP and the interest expense from the amortization table
The amortization to machinery and equipment is booked to separate account and also uses the straight-line amount from the PVLP
The voucher payment interfaced to accounts payable debits a clearing account to balance out the monthly lease entries.

15. Lease Administration Product Walk-through

16. Lease Administration Product Walk-through
Asset Classification rules are displayed on the Classification tab
Leases can have multiple assets and each asset can have its own classification
Each asset will have separate journal entries
The Actions menu provides a classification override if needed for each asset

17. Lease Administration Product Walk-through
Adding Properties to a lease uses existing Asset Management pages
Defaults for Profile/Categories control your lease accounting entries

18. Lease Administration Product Walk-through
The Cost distribution button holds the accounting distribution for each asset and automatically defaults to all rent related financial terms on the lease
Also displayed on the cost tab are the ROU Asset values and PVLP values

19. Lease Administration Product Walk-through
Accounting Entries for ROU asset values and Lease Liability balances are generated by Asset Management
Drill down to the Lease Accounting entries available directly from the lease

20. Lease Administration Product Walk-through
Lease Administration provides for a default borrowing rate percent and the rate can be overridden on each lease

21. Lease Administration Product Walk-through
Escalation schedules can be built with-in each financial term as displayed above

22. Lease Administration Product Walk-through
Escalation schedules can be built with-in each financial term as displayed above

23. Lease Administration Product Walk-through
Business Unit Definition contains default settings for lease classification
Includes an option to report all assets leases for that BU under IFRS rules (All as Finance Leases)

24. Preparation for Lease Accounting Changes
Steps
1st Step: Can your organization easily identify all your leases and identify all the related assets for those leases?
2nd Step: Align the upcoming accounting standards to all your leased assets. Will your current application be compliant when the rules change?
3rd Step: Know your business processes
4th Step: Begin working with the latest updates in PeopleSoft Lease Admin
5th Step: Understand how your organization will comply with the new accounting rules. Know your reporting requirements

25. Lease Amendment – Finance 842 Lease

26. Lease Amendment - Finance 842 Lease
Our Amendment will be to increase rent by $2,000 per month starting with May 1st
From the Action Menu, Select Manage Amendments

27. Lease Amendment - Finance 842 Lease
The Amendment History page displays, from there you can initiate your Amendment

28. Lease Amendment - Finance 842 Lease
The Lease Amendment page opens
Amend Identifier & Counter are displayed

29. Lease Amendment - Finance 842 Lease
On the Financial terms page we can control the Accounting & Transaction dates
Also displayed are the remaining lease payments, PVLP and ROU Asset Balances

30. Lease Amendment - Finance 842 Lease
Opening our Base Rent Financial Term we change the rent to $12,000 per month and update the Rent Escalation Schedule

31. Lease Amendment - Finance 842 Lease
Updated Amortization Schedule, May Adjustment Amount, New Straight-line Amount

32. Lease Amendment - Finance 842 Lease
Accounting Entry for adjustment amount
Rent Expense entry reflects updated straight-line amount
Payment reflects new amount
Interest Expense reflects updated amortization table

33. Lease Amendment - Finance 842 Lease
Above is a sample screen shot from the Depr Calc asset look up page. Looking at our asset, #219, it is listed as an adjustment from our lease amendment

34. How MIPRO Can Help

35. Engage MIPRO For Your Lease Administration Needs
Visit our website for more information or to discuss your Lease Administration Implementation
“101 Best & Brightest Companies to Work For” 11 years in row
“Cool Places to Work”
Four times
Specialized
PeopleSoft Enterprise
Our Heritage
Founded in 2005, 500+ engagements throughout North America
Dedicated exclusively to PeopleSoft
Larry Zagata
Managing Partner, VP Delivery
(M)
Our Passion
Award winning culture attracting most experienced talent anywhere
Integrity – we take great pride in consistently doing the right thing
Steven Brenner, CPA
Senior Principal Consultant
(M)
Our Focus
PeopleSoft Financials, Supply Chain, ALM and HCM
Upgrades, Implementations and Optimizations

36. Questions & Answers

37. Please complete a session evaluation
Session ID:
Contact Info:
Tel: (M)