Symphony 2: Train-The-Trainer – Lease Management & Accounting
SAP S/4 HANA Implementation for POSH, PCL & MBC
09 December 2019
Ground Rules
Fill in your name, department and
Refrain from side-conversations
BU on the questionnaire form
Silence cell phones
@ Check E-mail during breaks ONLY
Course Objectives
Overall Objectives
Provide an overview on the processes and system operations on Lease Management & Accounting
(IFRS16 Compliant)
In detail, this course aims to enable the participants to:
Understand Lease Management and Accounting Process, Key Terms and Definitions
How to create and change leases as RE Contract in system via REFX module
How to perform valuation and valuation postings (IFRS16 Compliant)
SAP Symphony 2 | Page 3
Training Agenda
Topic
Key Concept & Overview
RE-TTT-10: Create Contract
RE-TTT-20: Periodic Posting
RE-TTT-30: Change Contract
RE-TTT-40: Generate Report
RE-TTT-50: Contract Settlement
SAP Symphony 2 | Page 4
Key Concept & Overview: Introduction to IFRS16 and Accounting Requirements
Introduced in 2017, IFRS16 requires lessees to recognise contract leases on the balance sheet as lease liabilities and right-of-use asset.
What’s New? This means that at the commencement date, a lessee has a financial obligation to make lease payments to the lessor for its right to use
the underlying asset during the lease term.
Accounting Entries
Initial Measurement Initial Valuation Posting Subsequent Valuation Posting
Accounting Entries Accounting Entries
Lease Liability Right-of-use asset
ROU Asset Dr ROU Asset Adjustment for decrease in Dr Lease Liabilities
term
Cr Lease Liabilities Cr ROU Asset
Sum of Lease
Clearing Dr Lease Liabilities Cr P&L
Payments / Lease Liability
Discount Rate Cr Lease Clearing Adjustment for revised Dr Lease Liabilities
discount rate
Interest Dr Interest Cr ROU Asset
Lease payments made
Adjustment for increase in Dr ROU Asset
before or at Cr Lease Liabilities leased space
commencement Date
Depreciation Dr Depreciation Cr Lease Liabilities
Restoration Cr ROU Asset
Costs
• Contract changes affecting cash flow (e.g.
Initial Direct • System computation of accounting entries are
renewal, rent increase) can be centrally
Costs IFRS16-compliant
stored and tracked in RE-FX
• Supports mass run of valuation posting for • Supports contract revaluation based on
multiple contracts
Incentives changes above keyed into RE-FX contract
• Customization of account determination to • Adjustment entries that are complex if done
post to right G/L account
• Auto-computed based on contract terms and manually are calculated by SAP according
conditions entered into RE-FX to IFRS16 guidelines
SAP Symphony 2 | Page 5
Key Concept & Overview: Introduction to IFRS16 and Accounting Requirements
RE-FX’s contract management capability when combined with new valuation features is able to provide the data for lease liability and RoU asset recognition. When
integrated with FI-AA, it has the added convenience of auto-asset creation. However, FI-AA provides little value when used on its own.
Robust Contract Management
• Contractual Terms & Create Asset Separately
Conditions e.g. rent, • Create ROU asset shell on
prepayment, initial costs AA module
Valuation Posting
• Vendor • ROU asset useful life is
• Recognise lease liability and based on lease term
• Lease Term
right-of-use asset
• Subsequent measurements Support RE Leasing Processes
• Simulate and cancel valuation • Manage critical dates
• IFRS16 rule in RE-FX auto- • Exercise renewal option
calculates based on accounting • Early termination
standards • Rent increase
• Direct FI integrated cash flow
with tax and multi-currency
function
RE-FX Auto-Asset
Creation
FI-AA
Periodic Posting Run
• Lease payments catered
for Account Determination
• Reduce number of complex • Pre-configure to direct cash
interface flows to correct G/L account
• Auto-determined each time
Flexible Reporting posting is run, and for Post Depreciation
subsequent measurements • Execute depreciation
run on RoU asset at
the month end to post
the depreciation.
• Assign depreciation
key for straight-line
depreciation
SAP Symphony 2 | Page 6
Key Concept & Overview: Key Terms Used
• Contract Type
◦ Contract types determine the accounting treatment. They are categorized into Lease-In/Lease-Out and Real
Estate/Plant & Equipment.
• Condition Types
◦ The cost components of a contract such as base rent, service charge etc.
• Unit Price
◦ The dollar value of the Condition Type.
• Perform Valuation
◦ The calculation of values for IFRS16 posting
• Post Valuation
◦ The process to post IFRS16 accounting entries
• Business Partner
◦ For a lease-in contract, this refers to the lessor. For a lease-out contract, this refers to the lessee.
SAP Symphony 2 | Page 7
Key Concept & Overview: Key Terms Used
• Right-of-Use Asset
◦ The right-of-use asset is a lessee's right to use an asset over the life of a lease. The asset is
calculated as the initial amount of the lease liability, plus any lease payments made to the
lessor before the lease commencement date, plus any initial direct costs incurred, minus
any lease incentives received.
• Time Slice
◦ A new validity period used to indicate differentiate a period with different rates, charges or
discount rate
• Activate Contract
◦ A mandatory action to validate the contract before valuation posting
• Initial Valuation
◦ The first valuation of the contract for IFRS16
SAP Symphony 2 | Page 8
Key Concept & Overview: Key Terms Used
• Subsequent Valuation
◦ Valuation after changes to a contract
• Notice
◦ Termination/Pre termination of the lease
• Retroactive change
◦ A change is made after the posting period has closed
SAP Symphony 2 | Page 9
Training Agenda
Topic
Key Concept & Overview
RE-TTT-10: Create Contract
RE-TTT-20: Periodic Posting
RE-TTT-30: Change Contract
RE-TTT-40: Generate Report
RE-TTT-50: Contract Settlement
SAP Symphony 2 | Page 10
