Pre-Migration Leased Asset Functionality

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.

See also Understanding Conversion to PeopleSoft Asset Management

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 inAsset Lifecycle Management Fundamentals: Understanding How PeopleSoft Asset Management Integrates with Other Applications.

See Asset Lifecycle Management Fundamentals: 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.