Introduction

19

The Shift: Regulatory Changes at a Glance

19

IFRS 16 vs. IAS 17

20

ASC 842 vs. ASC 840

24

Compliance Timelines and Transitions

27

The Impact: Changes to Financial Processes

30

Accounting

30

Disclosures and Reporting

34

The Solution: Leasing Systems from SAP

36

SAP Lease Administration by Nakisa

37

SAP Flexible Real Estate Management

38

Summary

39

1 Lease Accounting Basics

41

1.1 Building Blocks of a Lease

41

1.1.1 Identified Asset

42

1.1.2 Right of Use of an Asset

43

1.1.3 Lease Modification

44

1.2 Lessee Accounting

45

1.2.1 Lease Classification

45

1.2.2 Initial Recognition and Measurement

48

1.2.3 Reassessment and Subsequent Measurement

55

1.2.4 Capital Lease/Asset Impairment

59

1.2.5 Operating Lease

61

1.3 Lessor Accounting

62

1.3.1 Lease Classification

63

1.3.2 Lease Components versus Non-Lease Components

65

1.3.3 Revenue, Including Variable Consideration

66

1.3.4 Collectability

67

1.3.5 Initial Recognition and Measurement at Contract Lease Start Date

68

1.3.6 Recognition and Measurement Re-Assessment/Modification of the Lease

69

1.3.7 Impairment

71

1.3.8 Sales-Type and Direct Financing Leases

72

1.4 Summary

73

2 Evaluating Compliance Readiness

75

2.1 Leasing Requirements

75

2.1.1 Non-Movable Leases

76

2.1.2 Movable Leases

78

2.2 Master Data

78

2.2.1 What Kind of Data Do You Have?

78

2.2.2 Where Is Your Data Located and How Is It Stored?

80

2.2.3 How Do You Access Your Data for Lease Contracts?

81

2.2.4 How Do You Organize Contracts?

82

2.2.5 How Should You Prepare for Data Migration?

87

2.3 Business Processes

90

2.3.1 Fixed Assets

91

2.3.2 Procure-to-Pay

93

2.3.3 Plant Maintenance and Materials Management

94

2.3.4 General Ledger Accounting

95

2.4 System Changes

96

2.4.1 Integration with an Existing ERP System

97

2.4.2 Lease Lifecycle in the System

99

2.4.3 Disclosures and Reporting

104

2.5 Summary

108

3 Managing Your Leasing Project

109

3.1 Defining the Scope

109

3.1.1 Choosing Business Processes and Functions

109

3.1.2 Determining Project Duration

110

3.1.3 Managing Risks

111

3.2 Establishing Timelines and Deliverables

112

3.2.1 Choosing a Project Management Strategy

113

3.2.2 Planning Project Phases

120

3.2.3 Setting Project Timelines

123

3.2.4 Leveraging Accelerators

124

3.3 Choosing Your Team

130

3.3.1 Internal Personnel

130

3.3.2 External Consulting

133

3.4 Setting Your Budget

134

3.4.1 Implementation Teams

134

3.4.2 Software and License Fees

136

3.4.3 Hardware Costs

137

3.4.4 Maintenance Costs

137

3.4.5 Contingencies

138

3.5 Kicking Off Your Project

142

3.5.1 Setting the Stage

143

3.5.2 Establishing Project Management Tools

143

3.5.3 Defining Standards and Procedures

143

3.5.4 Distributing Responsibilities

144

3.5.5 Communicating Project Milestones

145

3.5.6 Managing Business Expectations

145

3.6 Summary

145

4 Implementing SAP Lease Administration by Nakisa

147

4.1 Before You Begin

147

4.1.1 Choosing an Implementation Tool

148

4.1.2 Checking General Prerequisites

152

4.1.3 Outlining Customer-Specific Requirements

153

4.1.4 Exploring the AdminConsole

154

4.1.5 Reviewing Best Practices

155

4.2 Settings Tab

157

4.2.1 Settings

158

4.2.2 Roles

159

4.2.3 Data Connections

163

4.2.4 Additional Field Settings

164

4.3 Master Data Configuration

167

4.3.1 Application Configuration

168

4.3.2 System Configuration

171

4.4 Data Management

203

4.5 Build Management

208

4.6 Schedule Jobs and Thresholds

211

4.7 Field Management

213

4.8 Caption Editor

214

4.9 Logs and RFC Traces

215

4.10 Summary

218

5 Configuring SAP Flexible Real Estate Management for Lease Valuations

219

5.1 Basic Settings for Balance Sheet Valuation

222

5.2 Balance Sheet Valuation of Contracts

226

5.2.1 Control Settings for Each Contract Type in a Company Code

226

5.2.2 Screen Sequence for Entering Contracts in SAP RE-FX

227

5.2.3 Valuation Relevance

230

5.2.4 Valuation Rules

230

5.2.5 Condition Valuation Groups

234

5.2.6 Valuation Object-Dependent Control Parameters

238

5.2.7 Assignment of Asset Transaction Type to Real Estate Flow Type

239

5.3 Account Determination

240

5.3.1 Asset Posting

242

5.3.2 Clearing Posting

252

5.3.3 Interest Posting

255

5.3.4 Transfer Posting

258

5.4 Special Topics

262

5.4.1 Parallel Accounting for Multiple Accounting Principles

262

5.4.2 Changing Account Determination for Periodic Posting

263

5.4.3 Asset Accounting

264

5.4.4 Controlling

265

5.4.5 New Authorization Objects for Valuation

265

5.5 Summary

266

6 Transition Accounting

267

6.1 Practical Expedients

268

6.1.1 Definition of a Lease

269

6.1.2 Transition for Lessors

270

6.1.3 Transition for Lessees

271

6.1.4 Recognition Exemption

271

6.1.5 Sale-and-Leaseback Transactions

272

6.2 Choosing a Transition Approach

274

6.2.1 The Full Retrospective Approach

274

6.2.2 The Modified Retrospective Approach

275

6.3 Adopting the Modified Retrospective Approach

276

6.3.1 Lease Liability for Operating Leases

277

6.3.2 Right-of-Use Asset for Operating Leases

277

6.3.3 Lease Liability and Right-of-Use Asset for Finance Leases

278

6.3.4 Practical Expedients

278

6.4 Summary

280

7 Managing Leases with SAP Lease Administration by Nakisa

281

7.1 Master Lease Agreement

282

7.1.1 Creating a New MLA

282

7.1.2 Approving an MLA

287

7.2 Contracts and Lease Components

288

7.2.1 Creating a New Contract

288

7.2.2 Creating a New Lease Component

299

7.2.3 Approving Contracts and Lease Components

306

7.3 Activation Groups and Units

308

7.3.1 Managing an Activation Group

309

7.3.2 Activating a Lease

318

7.4 Lease Event Management

325

7.4.1 Reassessing Activation Groups

325

7.4.2 Applying a Casualty Activation Groups

327

7.4.3 Replacing a Unit in the Activation Groups

328

7.4.4 Modifying a Lease Contract

329

7.4.5 Applying a Contract Change

330

7.5 Summary

331

8 Managing Leases with SAP Flexible Real Estate Management

333

8.1 Lease Valuation Data

337

8.1.1 General Data

337

8.1.2 Partners

339

8.1.3 Terms

340

8.1.4 Objects

341

8.1.5 Conditions

342

8.2 Valuation Rules and Calculations

346

8.2.1 Assigning Valuation Parameters

346

8.2.2 Performing and Viewing Valuations

351

8.2.3 Running Valuation Reports

356

8.3 Valuation Postings

357

8.3.1 Posting Contract Valuations

359

8.3.2 Reversing Contract Valuations

363

8.3.3 Depreciating Right-of-Use Assets

363

8.3.4 Deactivating Leased Assets

363

8.4 Lease Modifications and Updates

365

8.5 Reporting and Disclosure Statements

366

8.5.1 Displaying and Maintaining Valuation Rules

366

8.5.2 Viewing Leased Assets for Contracts

369

8.5.3 Displaying Contract Valuations

370

8.5.4 Reclassifying Liabilities

371

8.6 Summary

372

9 Disclosures, Reporting, and Analytics

373

9.1 Standard Required Disclosures

373

9.1.1 Lease Cost

374

9.1.2 Right-of-Use Assets and Lease Liabilities

374

9.1.3 Differences between ASC 842 and IFRS 16

376

9.2 Reporting and Analytics with SAP RE-FX

377

9.2.1 Contracts

377

9.2.2 Conditions

380

9.2.3 Cash Flows

380

9.2.4 Periodic Postings

380

9.2.5 Balance Sheet Valuation of Contracts

381

9.2.6 Right-of-Use-Assets

382

9.2.7 Lease Liabilities

383

9.3 Reporting and Analytics with SAP Lease Administration by Nakisa

385

9.3.1 Disclosure Reports

385

9.3.2 Management Reports

389

9.3.3 Transaction Reports

391

9.4 Summary

393

10 Key Industry Considerations

395

10.1 Healthcare

395

10.2 High-Tech

399

10.3 Air and Defense

401

10.4 Summary

404

Conclusion

405

Chapter 1

405

Chapter 2

406

Chapter 3

407

Chapter 4 and Chapter 5

408

Chapter 6

408

Chapter 7

409

Chapter 8

409

Chapter 9

410

Chapter 10

411

Additional Resources

411

Appendices

413

A IFRS 16 and ASC 842 FAQs

413

B The Authors

423

The Contributors

424