Oracle Cloud Assets Leases | Full Tutorial

Kindly Join My Membership Club https://www.youtube.com/channel/UC1xVxwcN21FGpWhw-m-LFew/join Leasing is an important activity for many organizations—whether a public or private company, or a not for-profit organization. It is a means of gaining access to assets, obtaining financing, and reducing an organization’s exposure to the risks of asset ownership. Many organizations lease assets such as real estate, airplanes, trucks, ships, and construction and manufacturing equipment. Because of the prevalence of leasing, it is important for users of financial statements to have a complete and understandable picture of an organization’s leasing activities. The two leading accounting standard setting bodies, International Accounting Standards Board (IASB) and Financial Accounting Standards Board (FASB), published new lease accounting standards, IFRS 16 Leases and Leases (Topic 842) respectively. From January 2019, the two standards are in effect. Oracle Fusion Assets allows the lessee to comply with these new accounting standards from Oracle Fusion Financials Cloud Release 13. In Oracle Financials Cloud, a lessee can use Oracle Assets and Oracle Payables together. From Oracle Assets: Create asset leases and calculate the lease liability and cost to be capitalized. Add the leased asset to the asset book. Calculate the periodic depreciation expense and interest expense on the lease liability for finance lease assets. Calculate the periodic lease expense for operating lease assets. Generate periodic lease payment invoices with the correct distribution account. Schedule transfer of lease payment invoice to Fusion Payables Change lease term and payment schedules, and capitalize changes in liability. Terminate the lease at the end of the lease term or earlier. Report and inquire on leased assets. From Oracle Payables: Validate, approve, and account lease invoices transferred from Assets. Pay lease invoices on the due date. You must complete the following setup steps to enable the lease feature for an asset book: 1. Enable the Allow leased assets option for your asset book on the Create Book page 2. Manage Fixed Assets Lookup: Lease Clearing Account: Only asset type account is allowed. Periodic lease payments that reduces the lease liability is credited to this account and credit will be reversed when lease payment invoice is accounted in your payables system. The excess of cost over the lease liability in leased asset addition is charged to this account. For example, initial direct costs incurred to negotiate or arrange a lease are not included in lease liability, but they are only included in the leased asset’s cost. When you create invoices in Payables to make lease-related payments that need to be included in the leased asset cost but not in the lease liability calculation, use this account as the distribution account for the invoices. Lease Currency Rate Gain or Loss: Only expense and revenue type account are allowed. Required for asset book with reporting currency. Gain or loss on lease liability due to change in the currency rate is charged to this account. Specify default rules that are applied automatically when you create leases using the Create Lease page. Payments such as variable lease payments and initial direct costs are normally not included in lease liability and cost calculations. You must specify the lease payments to be excluded from lease liability and cost calculation in the following fields: Payment Types Excluded from Liability Payment Types Excluded from Cost Payables Setups Complete the following setup steps to create the lease payment invoices and make payments: Assign at least one business unit as Payable Business Unit to your primary ledger Create at least one Supplier and site for each of your Lessors from the Suppliers Work Area in Oracle Procurement Navigation: Setup and Maintenance – Manage Fixed Assets Lookups Enter in ORA_FA_ALLOW_LEASE in the Lookup Type and click on Search Enter in the Book name, Common Set for Reference Data Set and Meaning (Same as Book). 3. . Setup the leased asset category and assign it to your asset book. You must enter the correct values for the following attributes when setting up the lease category Enter Lease as the category type. Enter all lease default accounts: Lease Liability Account: Initial lease liability, periodic interest on lease liability, and periodic lease payments are charged to this account. Lease Interest Expense Account: Only expense type account is allowed. For finance lease assets, the interest on lease liability is charged to this account. Operating Lease Expense Account: Only expense type account is allowed. For operating lease assets, operating lease expense that is calculated to allocate the cost of the lease over the lease term is charged to this account.