JDE New Lease Accounting Functionality
12 Minute Video
What are the New Lease Accounting Standards?
FASB and IASB released a new lease accounting guidance, which requires many companies to change how they account for and report on lease transactions. The primary reason for the new regulations is to ensure transparency into a company’s leased assets and liabilities. With the changes virtually all lessors or lessees will be required to calculate lease values and make those calculations to their current balance sheets.
December 15, 2018
December 15, 2019
New JDE Functionality
JD Edwards has released new functionality to meet lease accounting software standard. This functionality from the software:
- Tracks unique lease agreements with vendors in order to recognize the newly required rights and obligations
- Creates Amortization Schedules for the lease’s Right of Use Asset and Lease Liability
- Generates monthly accrual General Ledger entries for the lease agreements
- Interfaces with Fixed Assets to track lease costs by Asset
- Interfaces with Accounts Payable to create vouchers for lease payments
- The classification of the asset must be a “Right of Use” Asset, which will be amortized over the life of the lease.
- The Lease Liability will be reduced with lease payments over the life of the lease.
There are two classifications for the Lessee when engaging in a new lease– Finance and Operating. If the lease is classified as a Financial Lease:
- Transfer of ownership of the asset takes place
- Lessee option to purchase asset
- Lease term for a major part of the remaining life of the asset is in place
- Present value of lease payments and residual value are almost all of fair value
- No value to lessor at the end of the lease
If the lease does not meet any of the other criteria and applies to the lessee, than it would be classified as an Operating lease.
JDE Lessee Implementation
For JD Edwards, what does it take to implement this new accounting standard? Especially for the Lessee, there are three pieces that must be used during the implementation:
- Fixed Assets
- Accounts Payable
- Real Estate Management
The Real Estate Management module is heavily used and allows the ability to streamline financial and operating processes. The module provides access to monitor real-time data from the lease agreement.