The two most widely used lease accounting standards differ to some extent in their treatment of leases.
ASC 842 requires you to classify all reportable leases as either operating or finance leases. For operating leases, after the ASC 842 changes, the outcome is an increase in reportable assets and liabilities on the balance sheet.
IFRS 16 requires a single classification of all leases as finance leases. You break down expenses for leases for lessees into interest and amortization expenses.
The accounting standards IFRS 16 and ASC 842 for leases require reporting and disclosures on
- Right of Use balance (ROU)
- Liability balance
- Short term vs. long term liability
- Avg. weighted rate / term
- Portfolio details
- And more
Review this blog post for an overview of lease accounting reports available to lessees in Oracle Cloud Lease Accounting. The application delivers lessee functionality for any enterprise in any industry that leases properties and equipment.
Key capabilities delivered with six reports currently available in Lease Accounting are outlined below.
1. Lease Disclosure Report
Use the Lease Disclosure Report to summarize lease expenses, cash flows, future lease payments, weighted average items, and lease details. This report helps you create the year end lease expense disclosures for IFRS16 and ASC42 financial reporting.
The Lease Disclosure Report is a single repository for almost all the disclosure information required for IFRS16 or ASC842 lease expenses. It delivers data for disclosures and foot notes to financial statements by fiscal year, business unit, and ledger.
You can easily identify:
- Lease and Non-Lease expenses.
- Lease and Non-Lease cash outflows.
- The Right-of-Use (ROU) balances and its movement reporting.
- The weighted average of the remaining lease term and discount rates on the leases.
- List of active, terminated, and expired leases.
- Reporting concerning Related or Non-Related party leases, cash, and ROU.
- Upcoming Options with exercisable amounts to understand potential obligations.
- Cash Projections of leases for the next 5 years with a breakup of the Principal Recovery and Interest Accrual amounts.
A report output sample for the Lease Disclosure report can be found on Oracle Cloud Customer Connect (CCC) forum post here: https://community.oracle.com/customerconnect/discussion/688382/reports-available-in-fusion-lease-accounting#latest
The above CCC forum post also includes report output samples for the subsequent reports listed below.
2. Lease Liability Analysis Report
Analyze your lease liability to address operational needs such as non-discounted cash flows by current quarter-end, year-end, greater than 60 months, and so forth.
The report outlines
- Discounted and undiscounted payments
- Current and non-current discounted liabilities
- Break-down of non-discounted liability into buckets (<12 month; 13-60 months; >60 months)
3. Lease Transactions and Balances Report
Report on your Right of Use and Liability balances by business unit from the start of a fiscal year up to the period selected.
This operational report helps you:
- View the ROU or Lease Liability balances for a portfolio of leases at business unit level
- Understand the activity in ROU and Lease Liability
- Compare the Scheduled and Accounted balances
- Understand the pending accounting transactions. The discrepancy between the scheduled and accounting balances points to pending user activities.
The Lease Liability section has the following scheduled transaction activity:
- Interest
- Payments
- Other movements, such as amendment adjustments and termination reductions.
The ROU section has the following scheduled transaction activity:
- Amortization
- Other movements such as amendment adjustments, termination reductions, scope reductions for each of the accounting standards. Lease Accounting displays each accounting standard number on individual rows of the report.
4. Lease Detail Report
This report is generated automatically as part of the lease activation.
When the Process Lease Actions program is run, it performs the following activities:
- Generate the Lease Details report.
- Moves the lease status from Booked to Finalized
This report groups data by Amortizations, and by Present Value and Amendment Calculations.
It reports the scheduled cash payments with the due dates.
This report includes information on:
- amendments
- terminations
- lease expiry
- option management action
- payment increases
5. Lease Abstraction Details Report
Obtain concise summary of important legal and financial details of a particular lease by selecting business unit and a lease number.
You can then analyze a lease in more detail by reviewing:
- Terms & Conditions
- Assets
- Payments
- Options
- Notes
- Attachments
- Version History
6. Lease Impairments Report
The value of the assets associated with a lease may fall below their fair value or recoverable amount. If this happens, the lease administrator performs a full or partial impairment on the lease asset. The impairment transaction writes down the ROU balance.
Use the lease impairment report to review impairment amounts for a business unit, legal entity, time frame and, if required, for a particular lease number.
Useful UI MS Excel Extracts
You can also benefit from two useful UI MS Excel extracts as follows:
Search and Report on Lease Payments
Search for Lease Payments or Non Lease Payments across leases.
The search results can be exported to excel for various types of analysis including:
- upcoming payments
- approval status
- supplier invoice numbers
- paid-unpaid status
Lease Modification Summary – Export of Schedules
In the Schedules tab you can export details of amendment transaction on a Lease. The details are available until the Lease Version moves to ‘Booked’ status from Schedules
Generation.
Conclusion
You can address your year-end external fiscal statement and disclosure requirements for lease expenses with the Lease Disclosure Report. In addition, you benefit from other operational reports to analyze lease expense ROU, Liability, future cashflow and much more.
Useful Oracle Documentation
To gain more insight into Lease Accounting reporting refer to chapter 6 on Reporting in the Using Lease Accounting guide:
For an overview of how to Automate Lease Processing Lessees refer to this prior blog:
https://blogs.oracle.com/erp-ace/post/automate-lease-processing-for-lessees