Lease Accounting
- Expense Recognition for Exempt Leases
Apply recognition exemptions to short-term leases, leases of low-value items, or leases with payments below capitalization thresholds. Lease administrators can recognize exempt lease payments as an expense on a straight-line basis over the lease term. The expense recognized per period is calculated by dividing the total lease payment by the number of periods in the lease.
To define an exempt expense with straight-line expense recognition:
- Create an expense lease.
- Add an asset and payment to the lease.
- Navigate to the Accounting sub-tab on the Payment Details page.
- In the Exempt Expense section, select the Amortize Over Term checkbox.
- Validate the lease and generate schedules.
- View the Amortization Details schedule to see the expense recognition schedule
- Lease Classification in Primary and Secondary Ledgers
Classify and account for leases differently under different accounting standards. Allow multinational organization lease administrators to generate accounting for a lease as a compliant lease, classified as either a Finance or Operating lease in the primary ledger under one GAAP, and as an exempt lease in the secondary ledger under another GAAP.
- Amortized Liability Balance Method for Lease Liability Reclassification
Automatically account for short-term and long-term lease liability. The IFRS 16 and ASC 842 accounting standards require breaking out the lease liability into short-term and long-term for disclosure reporting.
In addition to the lease liability classification option based on the present value method, Lease Accounting offers an alternate option to classify lease liability based on the amortized liability balance method. In this method, the long-term liability is calculated by discounting cash flows starting from the 13th month. The short-term liability is then calculated as the difference between the total discounted lease liability at the current month-end and the long-term liability.
Lease administrators can automatically generate accounting entries to classify the lease liability into short-term and long-term, and account for the periodic movements from long-term to short-term.
- Lease Payables Invoice Processing
Set up payment templates to configure whether to automatically create lease invoices in Payables for payment processing. Lessees often work with lessors who create their own invoices and send it to the lessee to receive payment. Lessees then make payments against the supplier invoice instead of generating a self-billing invoice.
Lease administrators can use the Generate Invoices checkbox in the Create Expense Payment Template and Update Payment Details pages to control the automatic creation of Payables invoices for lease payments.
- Lease Property Definition for Expense Leases
Define and upload property information using File-Based Data Import. Lease administrators can then associate the properties with the assets on an expense lease.
Companies typically have many leases that include properties such as buildings, floors, and offices. Including the specific property information on the lease and related lease invoices reduces the time to pay the lease invoices. Lease accountants reduce their reconciliation and period close time by knowing which expenses are associated with which specific property.
To define and associate properties to expense leases:
- Import properties with Tenure as Leased and Available for Lease as Yes
- Create an expense lease for the property.
- Update lease details to set Require Property Definition to Yes.
- Associate properties to each asset.
Assets
- Annuity Fixed Assets Depreciation Method
Configure and assign an annuity depreciation method to fixed assets using a formula-based depreciation method. Oracle Assets calculates depreciation expense and interest expense for the interest lost on the opportunity cost of capital.
This feature can be enabled for select asset books that require fixed assets to depreciate under the annuity depreciation method.
- Exception-Based Approvals for Fixed Asset Transactions
Optimize controls for managing the fixed assets lifecycle to route exceptions for manager approvals and use automatic approvals for routine transactions. These approvals encompass most asset transactions including additions, transfers, retirements, re-classifications, and cost or method adjustments.
The asset capitalization process requires a certain level of governance to review and approve the capital costs that are initialized as the cost of an asset. Similar governance is required for movement of assets, retirements, and other forms of cost adjustments.
Assets provides an approval workflow that allows users to configure the proper approval mechanism to tightly control fixed asset transactions that materially affect the balance sheet and profit and loss account. This serves as a centralized source of information, which helps to comply with internal controls and provides better accountability and recording of the audit trail.
When asset transactions are posted, Assets sends an approval request notification to the approver identified from the rules provided. Transactions for a single asset or an entire batch can be approved. These are referred to as the approval stages and the approval rules must be defined separately.
- Transaction Processing Order in FBDI Templates
Use the Interface Line Number within Adjustment, Transfer, and Retirement FBDI Templates to establish the transaction processing order for assets with multiple transactions. This identifier also serves to uniquely link rows in the parent sheet with associated data in other sheets of the template, such as distributions, source lines, rates, etc. This is an optional field and can be left blank for transactions pertaining to distinct assets.
The transactions are executed sequentially in the order of the interface line number.
This removes the requirement to generate either a separate FBDI file or assign a distinct yet sequential batch name for each such transaction. It further streamlines the process, sparing users from either loading files or batches in the designated processing sequence.
- Synchronization of Asset Retirements Between SCM Installed Base and Fixed Asset
Synchronize updates between Supply Chain Installed Base and Fixed Assets for the retirement of serialized assets. This ensures accurate operational and financial information regarding the company’s fixed assets activities.
Automatically terminate the Installed Base asset while retiring the corresponding fixed asset in Oracle Assets. In addition, automatically initiates the retirement of the fixed asset while terminating the associated installed base asset. This bidirectional integration between the Installed Base and Oracle Assets ensures consistency between the operational and financial asset information.
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