Lease Administration

Introduction

             PeopleSoft Lease Administration was introduced with Image 19 update by renaming the PeopleSoft Real Estate Management (which is kind of a sub module to Asset Management module) (but not extensively used). However, the module usage has been started since April 2019 to meet the IFRS16 regulatory requirements, where Accounting of Lease Assets/ Leases became mandatory. 

            Before the introduction of Lease Administration module, PeopleSoft Asset Management holds a submodule called Leased Assets, which was used to record Leased Assets but not for accounting purposes 

            PeopleSoft Lease Administration integrates with Oracle's PeopleSoft Financial Management and Supply Chain Management, to ensure that leases are managed according to terms; cost and space utilization are captured for performance management; and divisions comply with companywide financial processes and controls.

• Effectively manage property and equipment leases with a comprehensive view of lease and space management information.
• Optimize space utilization with streamlined space assigning, occupancy and vacancy tracking, and monitoring capabilities for each defined space—utilize a unique, real-time graphical representation of space attributes, utilization, and occupancy for enhanced management capability. 
• Ensure accounting compliance with a system-wide audit trail that tracks lease payments to voucher creation and payment processing, and lease receivables from billing to invoice and cash receipts.

Note: Though Lease Administration is a different module and needs separate licence, Oracle still provides the basic functionality of the Lease Administration to be used with Asset Management licence.

 Before a Lease can be created the module needs to be setup/configured, that can avoid any errors when creating a Lease and the configuration steps list can be referred here

Process Flow:

The basic process flow for Lease Administration is as follows:

1. Create Lease
2. Activate Lease
3. Calculate Depreciation 
4. Create Accounting Entries
5. Close Depreciation
6. Generate Journal

The process flow is similar to Asset Management, but the Asset is generated when the Lease is Activated.

1. Create Lease

A Lease can be created in 2 ways:

One is through Lease Administration Module

Other is through Asset Management Module

To create a Lease, navigate to:

Main Menu-->Asset Management-->Asset Transactions-->Leased Assets--> Create New Lease

Or

Main Menu-->Lease Administration-->Payable Leases--> Create New Lease

Basic information that is required to Create a Lease is:

• Lease Name
• Lease Type – Select the Lease type from the list you have created.
• Lessor – Select the Supplier to which the payment is being made for this Lease
• Location – Select the Supplier Location
• Region – Select the Region.
• Commencement Date: Select the date, which is the Lease Start date.
• Termination: Lease End date
• Lease Signed: This is the Lease obtained date Select the appropriate roles on the Lease Administration section on the right.
• Asset Information (i.e. Add either Equipment or Property based on your requirement)
• Accounting Date
• Interest and Borrowing Rate
• Proration method : PeopleSoft Lease Administration enables you to calculate the prorated amount for recurring charges when the start date or end date of the recurring charges do not coincide with the calendar period start date or end date. PeopleSoft Lease Administration supports two proration methods: 365 Days and 360 Days.
• 365 day proration: This method is based on the number of days in the calendar period, where the period can be weekly, monthly, quarterly, or yearly.
• 360 day proration: This is a 30 day month proration where the billing frequency can only be monthly with 30 days in each month.
• Type of Lease Payments (like Base Rent, Initial Direct costs, Miscellaneous Rent, Prepaid Rent etc..): These Lease Payments holds most of the information about the Lease (like Supplier, Payment Schedules etc)
• There are 2 types are Leases exists Arrears and Advance.

 2. Activate Lease

 When all the basic information is provided, the Lease must be activated to start the accounting process.

 An Asset number will be generated after Lease is activated, with that we will move to the next stage.

 

You can refer information on steps 3, 4, 5 & 6 under Asset Management Section

 Just like in Asset Management, a Lease can be Amendend (Adjusted) or cancelled (retired) through the various actions available in the Lease Administration

 Lease Actions

You can specify various actions for a lease. The Action field is dynamic and works in conjunction with the lease Status field, enabling you to change the status of a lease at various stages.

For example, to activate a lease, you select Activate Lease from the Actions field (if you have user authority). After the lease status is Active, the only available actions are Cancelled, Expired, and Dispute.

The available values are:

• Activate Lease: You can activate leases if all the necessary lease information is correctly entered and validated by the system. Once a lease is activated, you can begin financial processing, make rent payments, and generate invoices. Activation of the lease validates the lease to ensure that all of the data entered is accurate. If errors are encountered, the system provides information for each error. You must correct these errors before you can reactivate the lease.

Validation errors, when detected, appears in a list towards the top of the page, showing all the errors the system detected. The system also highlights the fields that contain invalid data as a further visual clue. To view and resolve the error, you click the Go to Error link. Errors found on other pages have the Go to Error icon with the page name displayed. Clicking on the icon takes you to the named page.

• Add to My Portfolio: Select to add the lease to your portfolio page. This action is only available if the lease is not currently in your portfolio.
• Cancel Lease: Select to cancel a lease if the lease was entered in error. This action is only available if the lease status is in pending or active status, and the lease does not have any existing financial transactions generated.
• Close Lease: Select to close a lease that has expired and for which all final closing transactions are complete. When a lease is closed, you cannot process any financial transaction for that lease. Before closing a lease, Oracle recommends that you leave a lease in expired status for a period of time to allow for ad-hoc transactions, such as security deposit refunds, final bill payments, end of the year operating expense reconciliations, and so on.

Note: You may consider keeping the lease in expired status for one year to ensure that all transactions for that lease are completed.

• Copy From Existing Lease: Select to copy from an existing lease. You can copy from another lease only if your lease is in pending status.
• Delete Lease: Select to delete a lease. You must be in update mode and the status of the lease must be pending.
• Dispute Lease: Select to set a lease to dispute. The status of the lease must be in either active or holdover before you can set the status in dispute. Once a lease is in dispute, all financial transactions are put on hold. You cannot process recurring or ad hoc transactions until the dispute is resolved.
• Expire Lease: Select to set the lease status to expire. To expire a lease, the status must be active, in dispute, or holdover. Once a lease expires, all recurring rents are no longer automatically generated. However, you can still issue ad hoc transactions, such as security deposit refunds, percent rent sales reports, and operating expense reconciliations.

Note: If a lease, with straightline accounting specified, is manually expired, under straightline accounting rules, the accrual or deferral must be written off during the termination period. A one-time adjustment is made to end the general ledger entry and balance out the lease for all paid amounts.

• Holdover Lease: Select to set a lease to holdover. When the lease is set to holdover, the lease has already expired. You can complete negotiations or enable the tenant to continue to occupy the property for a short time beyond the expiration date. To extend the lease you need to create an amendment. If the lease's termination date is 6 months beyond the date on which the amendment is activated you are given the option to set the lease back into an active state.
• InterUnit Transfer: Select to initiate an interunit transfer. You need to provide the new business unit and lease number to complete the transfer of the asset in the lease. Lease amendment history will not be copied.

Note: Only active leases can be transferred. A Lease which has either a Security Deposit or a Percent Rent or an Operating Expense attached to it, cannot be transferred.

• Manage Amendments: Select to create an amendment on the lease or view past amendment history. Creating an amendment changes the terms and conditions of a lease, storing new terms along with historical terms. To create an amendment, the lease status should be Active or Holdover.
• Resolve Dispute: Select this value after the dispute is resolved. The lease is set to the original status before the dispute.
• Submit for Review: Select this action to submit the lease for review. If workflow is setup for Lease Administration, the system will send an email with a link to the lease abstract.
• Validate Lease: Select to validate the lease to ensure that all required fields are populated. Because you can enter the lease in pending status with little required information, the system must perform an extensive validation of all lease data entered to ensure that all of the appropriate entries are correct. During validation, if any errors are encountered, the system provides information on each of them.

Validation errors, when detected, appears in a list towards the top of the page, showing all the errors the system detected. The system also highlights the fields that contain invalid data as a further visual clue. To view and resolve the error, you click the Go to Error link. Errors found on other pages have the Go to Error icon with the page name displayed. Clicking on the icon takes you to the subsequent pages.

• View Lease Abstract: Select to view the lease abstract. You cannot view the lease abstract if the lease status is cancelled.

 

Above explained process is about adding a basic Lease and its process flow, this doesn't give complete picture about the Lease Intergration with Accounts Payable module.