Unlock the Power of GASB 96 SBITA's in PeopleSoft Lease Administration with a Simple Configuration-Only Solution!

March 7, 2023 | 7 minute read
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Introductory Note from Tina Thames, Director of PeopleSoft ALM Product Strategy:

Steven Brenner - MIPRO Consulting​"We are pleased to welcome Steven Brenner, Senior Principal Consultant and CPA from MIPRO Consulting as a special guest blogger!  Steven is a well-respected expert with over 10 years of experience in PeopleSoft lease tracking.  Today he is excited to share the Lease Administration configurable solution for GASB 96." 

Hello everyone.  I’m here today to discuss PeopleSoft Lease Administration and GASB 96, Subscription-Based Information Technology Arrangements (SBITAs) for government end users.  Specifically, the great news is that Lease Administration can be “configured directly out-of-the-box” to comply with GASB 96 with “No customizations required”.  Plus, the GASB 96 functionality applies to either new Lease Administration projects or adding GASB 96 configuration to existing Lease Administration implementations.  Either way, Lease Administration has you covered for GASB 96.

To illustrate GASB 96 in today’s blog, I will do a walk-through demonstration using Lease Administration with a sample SBITA contract and discuss the GASB 96 compliant journal entries.

Before we get started, let’s take a brief look at the components of an SBITA contract:

1. SBITA, Subscription Based IT Arrangements (payments) - Capitalize

2. SBITA Preliminary Project Stage Costs – Expense as incurred

3. SBITA Initial Implementation Stage – Capitalize when software is placed into service

4. SBITA Operational Activities – Expenses – Expense as incurred

5. SBITA Operational Activities – Improvements – Capitalize

Here is our sample SBITA contract:

Guest Pic1

Next, let’s look at the RTU Asset value for the SBITA contract:

Guest blog pic2

First, let’s look at this SBITA contract in Lease Administration using the PS Demo environment I configured.  On the General Information page, for reporting purposes, I created a new Lease Type, SBITA, to distinguish the SBITA contracts from equipment & property leases.  Then, I created a unique Asset Category to assign unique accounts to the SBITA journal entries.

Lease General Information

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Next, let’s go to the Financial Terms page, where I added the SBITA components. Looking at the Schedule of Payments section at the bottom of the page, we have the following:

1. The subscription amount for the SBITA labeled as Base Rent $7,500 (capitalize)

2. SBITA Preliminary Project Stage Costs - $8,750 (expense)

3. SBITA Initial Implementation Stage – $95,000 (capitalize)

4. SBITA Operational Activities – Expenses - $575 month (expense)

5. SBITA Operational Activities – Improvements - $12,500 (capitalize)

Schedule of Lease Payments

 

 

 

 

 

 

 

 

 

 

 

Going back to the top of the page in the Financial Summary section, Lease Administration tracks the following calculations:

1. Total Lease Payments is the Base Rent component ($7,500 x 12 x 5) = $450,000

2. The Present Value Lease Payments is the total payments discounted at 4% = $407,243.00

3. The ROU(RTU) Asset Cost (NPV + Initial Implementation Stage + Operational Activity Improvements) = $407,243.00 + $95,000 + $12,500 = $514,743.00

Lease Financial Terms

 

 

 

 

 

 

 

 

 

 

 

 

As shown above, Lease Administration has included the correct components in the RTU Asset value.  The other two remaining components, the Preliminary Project Stage Costs, $8,750 & the Operational Activities Expense, $575 per month, are not included in the RTU calculation and will be expensed as incurred.

Now let’s look at the journal entries using the accounts that I configured in Demo:

1. When the SBITA contract is placed into service, Lease Administration will create the RTU Asset & Liability. This entry is broken down for each of the components.  The first entry is to record the NPV of the monthly $7,500 subscription payments.  The second entry is to move/re-classify the accumulated Implementation Stage costs into Lease Administration and include that amount in the RTU Asset value.

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2. Next will be the journal entries for the amounts that will be expensed.  First, we have the Preliminary Project Stage Costs, $8,750.  This will be expensed when incurred, and for the purposes of this example, I have it coded to a General IT Expense account, and this will be a one-time journal entry. The next entry will be for the SBITA Operational Activities, monthly maintenance, $575, and this entry will be monthly.

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3. Finally, we have our SBITA Operational Activities – Improvements. For simplicity, I included this component upfront for our SBITA contract, but this is really for an improvement added to the Software 6 months after go-live.  In this case, when the improvement is placed into service, the $12,500 will be added to the SBITA Asset value.

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In addition to the journal entries illustrated above, Lease Administration will also perform monthly journal entries to amortize the RTU Asset & Liability.  For the first six months of the SBITA, the RTU will consist of just 2 components (the subscription payments & implementation costs), with the amortization calculation during that time reflecting just those 2 components. Then starting in the 7th month, a third component, Improvements, will be added to the RTU Asset value and be included in the amortization calculation at that time.   

This completes our GASB 96 walk-through with PeopleSoft Lease Administration. 

In conclusion, we were able to set up an SBITA contract using the delivered Lease Administration pages.  No customizations were required.  We were able to create a centralized location for storing all the SBITA components and maximize our reporting capabilities.  We were able to create the necessary journal entries to support GASB 96.  And lastly, this applies to both new and existing Lease Administration customers.

Thank you for reading.

 

About MIPRO

Since 2005 MIPRO Consulting has had a single point of focus: PeopleSoft. Known for our PeopleSoft experts, integrity, and for always “doing the right thing,” we are passionate about Oracle’s PeopleSoft solutions. Reach out, and we will let you know how you can get more out of your PeopleSoft investment.

You are welcome to write to me - steven.brenner@miproconsulting.com

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