Understanding Leased Assets

Beginning with PeopleSoft Image 27, PeopleSoft provides you with the ability to transition your leases to the new accounting standards ASC 842 and IFRS 16. Part of this transition includes the migration of Asset Management leases to the Lease Administration data structure. The migration establishes the sharing of leasing functionality between Asset Management and Lease Administration. There is no need to license Lease Administration to run the data migration and transition processes. However, certain components and functionality in Lease Administration will be hidden or unavailable unless you license Lease Administration. Customers licensed only for Asset Management will benefit from the features and functionality within Lease Administration that specifically address the core accounting requirements for payables leases (lessee agreements).

After migrating your Asset Management leases to Lease Administration, you can process information under the current accounting standard and then later transition to the new accounting standard closer to your organization's adoption date. You can also migrate your Asset Management leases to the Lease Administration data structure at your convenience. Because of functionality and page accessibility changes depending on whether you have migrated your leases, this topic is split into pre-migration and post-migration leased asset functionality.

For more information on lease migration, see:

Understanding the Data Migration and Transition Process

Understanding Shared Product Functionality for Asset Management Leases

PeopleSoft Asset Management incorporates full lease management functionality, including calculating and printing lease payment schedules, calculating leased asset revenues, and verifying leases as operating or capital leases, in accordance with FASB Accounting Standards Codification 840. It also provides the ability to define step leases as well as a robust lease payment integration with PeopleSoft Payables for automatic voucher creation.

In PeopleSoft Asset Management, you can retire and reinstate leased assets and track interim payments.

Note: Your transactions are maintained with multiple currencies if you use them in conjunction with leased assets.

Capital and Operating Leases

There are two basic types of leases: capital leases and operating leases.

A capital lease is treated as a financial asset.
It has a lease term and lease payment amount. The lease is carried on the balance sheet and is periodically depreciated.
An operating lease is treated as a nonfinancial asset to which no cost information is associated. It is normally expensed and can include rent and monthly payments that are expensed periodically.
PeopleSoft Asset Management uses the lease classification rules for capital and operating leases as proscribed by the country requirements that were established during the setup of book location. For example, in the United States, leased assets are defined and governed by Financial Accounting Standards Board (FASB) Statement 13.

Note: The United States FASB 13 lease classification rules apply to all countries unless otherwise noted. For example, in Germany, the threshold for capitalization is 90 percent of the leased asset's economic life, as compared to 75 percent under the United States' generally accepted accounting principles. In Canada, the classification of capital or operating leases is the same as that defined in the United States FASB 13. PeopleSoft Asset Management supports the United States, Germany, Canada, and Australia for lease type verification.

Step Leases

A step lease features variable payment amounts and variable timing over the term of the lease.

Examples of step leases include:

Step-down leases with decreasing or declining lease payments.
Step-up leases with increasingly larger lease payments during the lease term.
Skip-payment leases in which payments are not required during certain periods.

This table provides an example of a step-down lease schedule:

Number of Terms	Frequency	Payment Amount
6	Monthly	$400
18	Monthly	$350

This table provides an example of a quarterly step-lease payment schedule. It is suggested that you use three payment schedules with due dates as shown.

Schedule	Due Dates
Schedule 1	January, April, July, October
Schedule 2	February, May, August, November
Schedule 3	March, June, September, December

For an annual step-lease payment schedule, it is suggested that you use 12 payment schedules, with one schedule for each of the 12 months as the payment due date.

Lease Payment Integration with PeopleSoft Payables

You can enable the lease payment integration between PeopleSoft Asset Management and PeopleSoft Payables to automatically generate vouchers for lease payments that are calculated in Asset Management. This includes both capital and operating leases. Additionally, the lease payment schedule segregates the principal and interest of each payment and is used by the Depreciation Close process (AMDPCLOS) to generate the payment accounting entries. The lease payments can be allocated on a monthly basis, in accordance with GAAP, and Asset Management generates the associated monthly accrual accounting entries. Lease Interest Contra and Lease Obligation Contra accounts must be established as clearing accounts, which are offset by the Payables voucher entries. This integration is enabled at the Asset Management business unit level.

See Integrating with PeopleSoft Payables – Sending Lease Payments to Paybles inUnderstanding How PeopleSoft Asset Management Integrates with Other Applications.

See Interface Options Page.

Once you have enabled the lease payment integration with PeopleSoft Payables at the business unit level:

Complete the Payables Integration page within the Leased Assets component with pertinent integration information by asset.
Review payment date, integration status, and Payables information for lease payments that are selected for Payables integration using the Review Payments page.
Approve pending lease payments to Payables (if the pre-approval option is not enabled).
Upload payments to be processed to Payables.
Run AP/AM Payment Reconciliation report.

See Integrating Lease Payments with PeopleSoft Payables.

PeopleSoft Asset Management shares functionality with PeopleSoft Lease Administration to leverage the features and functions within Lease Administration that specifically address the core accounting requirements for payables leases (lessee agreements). Customers licensed only for Asset Management are not required to install Lease Administration, but there will be limited access to functionality in Lease Administration. More specifically, customers licensed only for Asset Management can only access pages under the Asset Management navigation and the required high-level configurations. .

Customers licensed only for Asset Management will be able to enter multiple financial terms, integrate payments with Accounts Payable, perform straight-line accounting, use amendment processing and create manual fees. Customers licensed only to Asset Management will not have access to clauses, options and critical dates, operating expenses, percent rent, security deposits, site selection and acquisition, my lease portfolio, and lease reports such as the lease abstract. In addition, customers licensed only for Asset Management are limited to only one asset per lease, and the tracking of lease options is limited to only those that are reasonably certain to be exercised.

Customers licensed only for Asset Management will have access to the following common components:

Shared Product Configuration	Navigation
Lease Administration Business Unit	Setup Financials/Supply Chain > Business Unit Related > Lease Administration > LA Business Unit Definition
LA Accounting Rules	Setup Financials/Supply Chain > Product Related > Lease Administration > Accounting > LA Accounting Rules
Amendment Types	Setup Financials/Supply Chain > Product Related > Lease Administration > General Definitions > Amendment Types
Lease Types	Setup Financials/Supply Chain > Product Related > Lease Administration > General Definitions > Lease Types
Prorata Basis	Setup Financials/Supply Chain > Product Related > Lease Administration > General Definitions > Prorata Basis
Related Lease Type Setup	Setup Financials/Supply Chain > Product Related > Lease Administration > General Definitions > Related Lease Type Setup
Borrowing Interest Rate	Setup Financials/Supply Chain > Product Related > Lease Administration > General Definitions > Borrowing Interest Rate
Transaction Routing Codes	Setup Financials/Supply Chain > Product Related > Lease Administration > Financial Terms > Transaction Routing Codes
Miscellaneous Rent Types	Setup Financials/Supply Chain > Product Related > Lease Administration > Financial Terms > Miscellaneous Rent Types
Manual Fee Types	Setup Financials/Supply Chain > Product Related > Lease Administration > Financial Terms > Manual Fee Types
Economic Index	Setup Financials/Supply Chain > Product Related > Lease Administration > Financial Terms > Economic Index
Role Types	Setup Financials/Supply Chain > Product Related > Lease Administration > User Roles > Role Types
Lease Administration Roles	Setup Financials/Supply Chain > Product Related > Lease Administration > Financial Terms > Lease Administration Roles
Options	Setup Financials/Supply Chain > Product Related > Lease Administration > Options

In addition, customers licensed only for Asset Management will have access to the following pages for lease entry and processing residing under the Asset Management navigation:

Shared Product Functionality	Navigation
Migration and Transition	Asset Management > Asset Transactions > Leased Assets > Migration and Transition
Create New Lease	Asset Management > Asset Transactions > Leased Assets > Create New Lease
Maintain Lease	Asset Management > Asset Transactions > Leased Assets > Maintain Lease
Generate Straightline Schedule	Asset Management > Asset Transactions > Leased Assets > Generate Straightline Schedule
Manual Straightline Adjustment	Asset Management > Asset Transactions > Leased Assets > Manual Straightline Adjustment
Processing Payments	Asset Management > Asset Transactions > Leased Assets > Processing Payments
Pending Lease Payables	Asset Management > Asset Transactions > Leased Assets > Pending Lease Payables
Manage Transaction Generator	Asset Management > Asset Transactions > Leased Assets > Manage Transaction Generator
Manage Interface to AP/Billing	Asset Management > Asset Transactions > Leased Assets > Manage Interface to AP/Billing