Oracle Cloud Lease Accounting | Lesson1

Overview of Lease Accounting Oracle Lease Accounting is a financial application that helps create and maintain leases in a single repository. Lease Accounting covers both expense and revenue lease creation, generation of payment and revenue schedules, and transfer of accounting information seamlessly to Oracle Payables and Oracle Receivables. Lease Accounting provides the ability to capture information such as lease details, assets, payments, and options. Calculations of accounting schedules, creation of milestones, rights, and obligations are also available. A lease validation process ensures quality data before activation. The amortization engine calculates the present value of the leases. Lease Accounting also calculates the amortization of the right-of-use and the lease liability balances according to IFRS16 and ASC842 for expense leases. The new accounting standards introduced in the past few years have transformed accounting rules that lessees must follow to comply. Lease Accounting has the following features: To help you manage and process leases to comply with IFRS16, ASC842, or both these accounting standards in a touch-free and seamless manner. To improve planning with a single repository of all lease obligations. To generate calculations for balance sheet balances and expenses. Key Features Oracle Lease Accounting has the key features of lease creation, generating amortization schedules, and maintaining accounting balances. Lease Accounting helps you do the following activities: Create expense and revenue leases. Capture cash schedules needed for the generation of balances and invoices. Roadmap for Setting Up Use this roadmap as the high-level procedure to implement lease accounting. Payables Financial Options System Options Primary Discount Rate Indexes Payment Term Templates General Ledger Calendars Account Payables Suppliers and Sites Document Sequencing Currency Conversions Payment Terms Inventory Organizations Master Item List Business Functions Set Up Payables Financials Option You must set up the Payables Financials Options before setting up the system options. You can complete the Manage Common Options for Payables and Procurement setups given in the Implementing Payables Invoice to Pay guide for your business unit. Generate balances required as specified by IFRS16 and ASC842 guidelines for expense leases. Generate amortization schedules using daily compounding interest and daily amortizations for expense leases. Lease Accounting creates the cash schedules with amortizations when you opt to generate schedules in expense leases. With this information, Lease Accounting generates the balances for right-of-use and lease liability balances based on different periods. Lease Accounting calculates the balances and amortizations by discounting the cash flows using the discount rates on the lease. Note: Currently, the only interest calculation method is the 'Daily Compounding Interest.' The amortization method is 'Daily' or 'Periodical' amortization. Using this information on the cash flows, Lease Accounting calculates the initial measurement amounts, which the standards require. Set Up General Ledger Calendars You must configure the GL calendars to enable selection of accounting dates for leases. For daily calculations, set up the GL calendar according to your business needs such as 4-4-5. You can set up a daily calendar only for calculations and follow the GL calendar for reporting and transaction creation. Set Up Payables Suppliers and Sites You must set up the Payables supplier and supplier site information to complete the payment information in the leases. You will need the Procurement Buyer role for assigning the suppliers and sites to your business units. Set Up Currency Conversions You must configure the currency information to enable the selection of currency for payment information in the lease. Oracle Lease Accounting stores the currency information for all lease transactions. Set Up Inventory Organizations You must set up the inventory organizations to select the items for the creation of assets. You can use the items for reference only, and these references don't impact the available quantity. You can quickly reference the items by defining the items in the Master Item list of the Inventory Organization. You can quickly search using attributes like Item, Fixed Assets, and such. You can add an existing inventory organization to your business unit or create one and add it to your business unit.