lease accounting update - ids · elfa confirmation • impact surveys received from working group...

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Shawn Halladay, Consultant

Kristie Kosobuski, BA Manager

Lisa Nowak, Senior Product Manager

Thursday, October 13 2016

Lease Accounting Update

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AGENDA

• SESSION OBJECTIVES

• PROJECT OVERVIEW

• IDS PROCESS

• KEY REQUIREMENTS AND SYSTEMS

MODIFICATIONS

• NEXT STEPS

• WRAP UP & QUESTIONS

2016 INTERNATIONAL DECISION SYSTEMS, INC. CONFIDENTIAL AND PROPRIETARY10/21/2016

10/21/2016 2016 INTERNATIONAL DECISION SYSTEMS, INC. CONFIDENTIAL AND PROPRIETARY

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SESSION OBJECTIVES

Get an overview of IDS’ process for requirements gathering against the new lease accounting standards

Understand lessor requirements from the perspective of IDS, your peers on the working committee and a key industry consultant

Learn IDS’ initial plans for systems’ modifications in response to key lessor requirements

Review next steps as you plan your future InfoLease upgrade

OVERVIEW OF IDS PROCESS

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LEASE ACCOUNTING STANDARDS – PROJECT OVERVIEW

• US GAAP: Fiscal period after 12/15/18

• IASB: Fiscal period after 01/01/19


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InfoLease 9 Release 386 and InfoLease 10 will be modified to enable customers

to comply with the Lease Accounting Standards

Lease Classification

Mid Term Adjustments

Bundled Leases (ASC 606)

IDC

Leverage Leases

Transition / Comparables

IASB Difference

Pricing

REQUIREMENTS DELIVERY – IDS TIMELINE


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IDS is partnering closely with our clients and industry experts to arrive at final areas of

impact and proposed systems’ changes driven by the new lease accounting standards

Product Modification

Definition Through Dec 2016

Design & Build Through Sept 2017

Product Delivery By Jan 2018

Requirements

Identification Through Sept 2016

InfoLease

386.xx

InfoLease 10.x

IDS, customer working

group & 3rd party

consultant evaluate final

standards & key areas of

impact

Requirements finalized

for modifications to core

InfoLease; PRD

reviewed with working

team

Iterative design

process with review

by working group;

Product development

REQUIREMENTS DEFINITION – IDS PROCESS


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Working Group

Surveys

Consultant

Review

ELFA

Confirmation

• Impact surveys received

from working group

• IDS review + surveys,

determined requirements

• Reviewed and confirmed

systems’ requirements w/

Shawn Halladay, industry

consultant

• Validated final

requirements w/ users

and experts at ELFA

Lease Accounting

// REQUIREMENTS & SYSTEM

MODIFICATIONS

LEASE CLASSIFICATION

TARGET INFOLEASE MODIFICATIONS

• Lessor parameter “Check FASB 13 Compliance” will be renamed,

but will remain a yes/no field.

• New lessor parameters will be added to allow configurability to the

lease classification tests.

• Minimum Lease Payments to FMV Percentage check will be changed

from hard-coded 90% to configurable %

• Configurable by % Economic Life validation will be added

• Change history to capture user-driven changes to configurable fields

• Configurable calculations used as of an entered effective date, with

former calculations being used up to that date

FASB and IASB changed the lease classification rules making the definition more

dependent on customer-defined criteria and less strictly defined by bright lines.

Some clients will need more configurability.

LEASE TYPE MODIFICATION / MID TERM

A requirement of the new mandate is that customers may have to convert between

lease types with accounting treatment handled systematically


• Automated handling of transition from current lease type to new

lease type for TL, CS, LP, RL, or OL

• Availability of customer-defined criteria for inclusion

• Automatic generation of G/L entries utilizing Assumption Journals

• Report or mechanism to run, then reconcile, and save copy for audit

• Ensure an event history is generated for each contract processed

• Maskable fields impact – prompt for and address all fields / multiples

• Mid-month changes are only balance forward

• No partial income or depreciation

BUNDLED LEASE CONSIDERATIONS

Given lessee / lessor reporting requirements around unbundled lease

components, Lessors will want greater control in managing who can administer

bundling


• New security permission available around administration of “Include

in Rent”

• Administrator should be able to grant permission at the user level to

set the ‘include in rent’ flag on one-time and recurring misc. to edit or

view only

• Utility to change the “Include in Rent” flag on existing miscellaneous

fees

MANAGEMENT OF LEVERAGED LEASES

Existing leveraged leases are grandfathered in under these new standards. While

customers cannot enter new leveraged leases after the effective date, many will

need to manage existing leveraged leases for many years


• All remaining functionality included in the leveraged lease module

converted to Web User Interface for IL10.

(NOTE: Today customers can only search for / view leveraged lease

functionality in the Web UI.)

• InfoLease has several leveraged-lease-specific reports. These existing

terminal reports need to move to IDS Reporting

FULL LIFECYCLE INTEGRATION

Existing integrations need to be updated to accommodate new configurations in

InfoLease for seamless integration across the lifecycle

TARGET RAPPORT MODIFICATIONS

• Rapport calls an InfoLease web service for FASB 13 compliance.

The API will need to change to support the lessor-level configurable

fields

• Any new fields added for the lease accounting project will need to

be available for entry and booking from Rapport

TRANSITION

Use of Modified Retrospective approach during comparative period (2 years prior

to effective date,) followed by choice of effective date forward with expedients or

modified retrospective approach as of effective date

NO TARGET INFOLEASE MODIFICATIONS

• New standard goes into effect for public companies

• US GAAP: Fiscal period after 12/15/18

• IASB: Fiscal period after 01/01/19

• Approach to compliance with new standard can include:

• Effective Date Forward with use of expedients

• Modified Retrospective

• Use of Modified Retrospective approach during comparative period

(2 years prior to effective date)

IDS APPROACH: This will be handled off system

OTHER CONSIDERATIONS

NO/MINIMAL TARGET INFOLEASE MODIFICATIONS

• IDS and our customers agree InfoLease is currently poised to

manage:

• IDC requirements

• Sales Leasebacks requirements

• With the addition that an RL can have tax depreciation

TBD INFOLEASE MODIFICATIONS

• IFRS Differences – believe to be small to insignificant

• Front end pricing impacts (e.g. IAQE, IA)

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• IDS is prepared to meet the requirements of the new standards

• IDS has been working across customer base and market to understand key lease accounting requirements

• Systems modifications will flow from these key requirements

• Enhanced versions of InfoLease available in ample time for upgrade / testing prior to effective date

QUESTIONS?

Lisa Nowak

Senior Product Manager, InfoLease

612.851.3244

[email protected]


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