US government entities adhere to GASB 87 on Leases. One of two methods of accounting applies, namely Accrual or Modified Accrual. 

  • Accrual

     You record expenses when a transaction occurs rather than on payment to supplier. 

  • Modified Accrual 

     This is an alternative accounting approach that combines the accrual basis of accounting with cash / fund basis accounting. You record expenditures when you incur liabilities. 

This blog post focuses on Lease Accounting in Oracle Cloud ERP. The system helps you address GASB 87 leases for lessees. You can account for property or equipment leases as a lessee with or without modified accrual basis of accounting. 

 

Flexible Accounting Representations

You can produce multiple accounting representations with Lease Accounting.

If you require accrual basis accounting only, perform the following setup:

  • Set up the primary ledger with IFRS 16 accounting method. Process IFRS 16 accounting entries from Lease Accounting into the primary ledger in General Ledger. 
  • This method establishes the Right-of-Use and Liability in accordance with IFRS16, including amortizations of these balances. 
  • There is only one Lease Classification, namely Finance leases.
  • This setup produces accrual basis accounting entries and amounts.

 

If you require modified accrual basis accounting, perform the following setup:

  • Set up the primary ledger with ASC 842 accounting method. This, in combination with Lease Accounting payment templates, generates modified accrual basis accounting. 
  • Set up your payment templates for Lease Liability and Right of Use account code combinations carefully for each accounting event. 
  • Set up the secondary ledger with IFRS 16 to address accrual basis of accounting.
  • Use the Lease Detail report or the Portfolio Detail report to perform year-end adjustments for reporting.
Example screenshot of Lease Accounting System Options setup, showing: Primary Accounting Standard: ASC 842 Ledger Name: Use Primary Ledger Secondary Accounting Standard: IFRS 16 Secondary Ledger: US IFRS Secondary Ledger
Figure 1: Lease Accounting System Options UI – Example of Primary and Secondary Accounting Standards Assigned.


 

 

 

 

 

 

 

 

 

 

 

For further guidance, refer to My Oracle Support: TECHNICAL BRIEF: Lease Accounting and GASB87 – Requirements for Lessees (Doc ID 2772485.1)


Conclusion

You have the flexibility to address GASB 87 accounting standard for leases for lessees with Lease Accounting. You can choose which approach best suits your government entity’s needs whether that be accrual basis of accounting or modified accrual basis of accounting. It is a one-time setup. Once evaluated successfully, Lease Accounting seamlessly produces the required accounting entries to meet your regulatory needs.