lease accounting update - ids · elfa confirmation • impact surveys received from working group...
TRANSCRIPT
1
Shawn Halladay, Consultant
Kristie Kosobuski, BA Manager
Lisa Nowak, Senior Product Manager
Thursday, October 13 2016
Lease Accounting Update
2
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
3
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
4
LEASE ACCOUNTING STANDARDS – PROJECT OVERVIEW
• US GAAP: Fiscal period after 12/15/18
• IASB: Fiscal period after 01/01/19
10/21/2016 2016 INTERNATIONAL DECISION SYSTEMS, INC. CONFIDENTIAL AND PROPRIETARY
5
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
10/21/2016 2016 INTERNATIONAL DECISION SYSTEMS, INC. CONFIDENTIAL AND PROPRIETARY
6
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
10/21/2016 2016 INTERNATIONAL DECISION SYSTEMS, INC. CONFIDENTIAL AND PROPRIETARY
7
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
TARGET INFOLEASE MODIFICATIONS
• 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
TARGET INFOLEASE MODIFICATIONS
• 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
TARGET INFOLEASE MODIFICATIONS
• 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)
16
• 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
10/21/2016 2016 INTERNATIONAL DECISION SYSTEMS, INC. CONFIDENTIAL AND PROPRIETARY