Setting Up Balance Sheet Lessee Accounting
Before you can process balance sheet lessee accounting information, you must ensure that the following tasks have been completed:
Define depreciation defaults.
Depreciation default accounts must be defined in the Depreciation Defaults program (P12002) for the company, object, and subsidiary combination for the asset account. Assets that are processed using lessee accounting must have Ledger Type = AA and Depreciation Method = 00 (no depreciation) as these assets will be amortized versus depreciated. The computation method is also required.
See Understanding Depreciation Default Values for additional information.
Accounts
Set up the accounts to support lessee accounting. The asset account used for leased assets must exist in the Account Master table (F0901).
The Right of Use Asset accounts need to be in the FC range of AAIs, and the Accumulated Amortization accounts need to be in the FD range of accounts. Both accounts must be in the FX range of AAIs as well. This is required for the Asset Disposal process to work properly when your lease ends and you no longer have the asset.
See Setting Up Accounts for more information.
Set up Real Estate Management Constants.
The Real Estate Management Constants program (P1510) has been updated to enable you to set default values for the following lessee accounting options:
Lease Classification
Reasonably Certain to Exercise Option
Generate Unit Asset
Activate Balance Sheet Accounting
Populate Subledger
You can define the Lease Classification and Reasonably Certain to Exercise option values for Company 00000. You can define the Generate Unit Asset value for buildings and individual companies. When you create a lease, the system uses the default values from the constants on the lease. You can override the Lease Classification and Reasonably Certain to Exercise Option values on the lease.
If the Generate Unit Asset option is selected, the system will automatically create an asset record for the unit if the Unit Asset Number field is blank in the Unit Master. That asset number is then populated in the Unit Asset Number field on the Unit Master record (F1507).
Note: Balance sheet lessee accounting uses the value in the Unit Asset Number field to identify leased property assets. Therefore, when viewing asset information on leases, you will see the Unit Asset Number field populated for property assets, and the Asset Number field populated for non-property assets.
Finally, once your setup is complete, you can activate balance sheet lessee accounting.
See Setting Up Constants for additional information.
Set up AAIs for lessee accounting.
Several new AAIs have been created to use when creating journal entries associated with lessee accounting.
See Setting Up Automatic Accounting Instructions for additional information.
Set up bill codes.
When you set up bill code records, you can specify how those records will impact balance sheet lessee accounting processing and recurring billing processing. You can define the effect a bill code will have on the lease liability calculation, and on the ROU asset calculation. These values, once added to either manual or recurring billing setup on a lease, are used when calculating the amortization schedules and journal entries for a leased asset.
See Setting Up Bill Codes and Adjustment Reason Codes for additional information.
Set up units and create associated unit asset records. (property assets only)
When you want to include property assets on a lease that will be included in the balance sheet lessee accounting process, you must create a unit and then associate each property unit with a unique asset number. The system has been updated to enable users to associate an asset with the unit master using these methods:
Manually enter an existing asset number in the Unit Asset Number field in the Unit Master record when you create the unit.
Set up the Real Estate Management Constants to automatically create the asset record for you if you leave the Unit Asset Number field blank when you add new unit records.
Use the Create Asset row menu option from the Work With Units form to create the asset and update the Unit Asset Number field.
Run the Create Assets from Unit Master Entries program (R15072) to create asset records and update The Unit Asset Number field for selected unit records.
See Setting Up Unit Information for additional information.
Set up asset records for non-property assets in the Fixed Asset system, or create them during lease entry using the Create Non-Property Asset icon.
See Creating Asset Identification Information in the JD Edwards EnterpriseOne Applications Fixed Assets Implementation Guide or Understanding Lessee Lease Entry for Balance Sheet Accounting (Release 9.2).
After you have set up the system to use balance sheet lessee accounting, you can create leases that include leased property and non-property assets. You can update information about the leased assets, and set up manual and recurring billing information. Once you have entered all of the information needed to process the lease, you can then set the Lease Liability status for each asset line on the lease to 10 (Lease Terms Complete), which signifies that the line is ready for the lease commencement process.
See these topics for additional information about entering leases and setting up manual and recurring billing information: