Real Estate Portfolio Management / Lease Administration / Background Data

Define Subledger Rules

If you are using the Extension for Lease Accounting, the Process Navigator includes the Lease Administration / Background Data / Define Sub-ledger Rules task (ab-ls-subledger-rules-define.axvw). If you are not working with the Extension for Lease Accounting, you do not need to work with this task.

When classifying leases, organizations run the Generate Subledger Entries for Leases task to generate the lease data in a format usable by the Accounting department for their general ledger. This data must be generated according to business practices at each site. For instance, each organization will have its own account codes. Likewise, when accounting for leases in transition, organizations may or may not use an "Equity (retained earnings)" account. Organizations can change how the Generate Subledger Entries for Leases task works by editing the underlying rules stored in the Lease Subledger Rules (ls_subledger_rules) table.

The subledger rules define the transitions that a lease goes through, such as transitioning from an operating lease to a finance lease, so that the Lease Classification Wizard can correctly report the financial data for each transition. For example, for some transitions, the rules define that the Wizard report a legacy obligation as a line item. Similarly, the rules can define how you report an increase or decrease in ROU Asset value as a result of the cost of an executed right-of-use option. Other rules define how to handle international leases so that they follow IASB conventions.

To generate the subledger items, the program follows the rules in the Subledger Rules table to copy values from the amortization schedule to the records of the Subledger Items table. Most of these rules are straightforward: they copy a particular value, such as the ROU Asset value, from a particular fiscal period of the schedule. However, some rules compare two values – such as a value from the fiscal period before and after an ROU Asset modification – and others sum several values, such as the Accrued rent liability (deferred rent) from a legacy lease.

The system applies the rules according to the values for these fields:

Legacy Lease Classification
Lease Guidance
Payments Scheduled

For instance, defining a rule for which Legacy Lease Classification is "ASC 840 - Capital" and Lease Classification is "ASC 842 - Finance" tells the program to apply that rule when generating entries for each lease that was reclassified from 840 Capital to 842 Finance (and only to those leases). The rules are additive: that is to say, the program generates sub-ledger entries for all rules that apply to a particular Legacy Lease Classification and Lease Classification combination

In the schema database, the Lease Subledger Rules table includes the default set of rules. When you start a new project, the rules are automatically available to your new project. You can then edit these default rules and create new rules to match the operations at your site.

Procedure

Load the Real Estate Portfolio Management / Lease Administration / Background Data / Define Subledger Rules task.
Define a rule by completing these fields:

Field	Description
Rule ID	Identifies the rule.
Legacy Lease Classification	You can choose from: ASC 840 - Operating ASC 840 - Capital IAS 17- Operating IAS17 - Finance Use "None" if there was no Legacy Lease Classification.
Lease Guidance	Choose from: All -- Choose this if rules should be applied to leases of all lease classifications. ASC 842 - Operating ASC 842 - Finance IASB16 - Full IASB16 - Modified
Description of Sub-ledger Entry	Describe the rule.
Post to Which Account	Choose an existing account from the validating Accounts table. The rule will post the value in the "Value to Post" field to this account. Each organization can use its own Account Codes. The default Account Codes are: 60500 -- ROU Asset 50000 -- Lease Liability 20000 -- Cash 18000 -- Gain 19000 -- Loss 11000 -- Equity (Retained Earnings) 10050 -- 840 Accrued Rent Liability 20700 -- 840 Capital Lease Obligation 60700 -- 840 Asset Value
Fiscal Period to Apply Rule	Choose from: At Commencement -- These posting occur at the beginning of the first fiscal period of the approved amortization schedule. Each Fiscal Period -- These postings occur each fiscal period between the Commencement Date and the FASB/IASB End Date. Items are posted as of the start date of the fiscal period. For instance, if the fiscal period begins on 2020-01-01, all items are posted on 2020-01-01. At ROU Modification -- These postings occur for any fiscal period for which there is an approved re-classification that results in an ROU adjustment (e.g. an expansion, contraction or extension) that produces a gain or a loss. Items are posted as of the start date of the fiscal period. At End of Fiscal Period -- These postings occur once each fiscal period between the Commencement Date and the FASB/IASB End Date. Items are posted as of the end date of the fiscal period. For instance: If the fiscal period is monthly and begins on 2020-01-01, all items are posted on 2020-01-31. If the fiscal period is monthly and begins on 2020-02-01, all items are posted on 2020-02-28. if the fiscal period is quarterly and begins on 2020-02-01, all items are posted on 2020-03-31. If the fiscal period is yearly and begins on 2020-01-01, all items are posted on 2020-12-31. This event, together with the "At Beginning/End of Second+ Fiscal Period" events, is used for leases that pay in advance, as these leases have a different set of values to report for the first fiscal period than they do for the subsequent fiscal periods. At Payment Date for Fiscal Period. These postings occur once each fiscal period between the Commencement Date and the FASB/IASB End Date. The posting occurs: If the lease has a Payment Scheduled value of In Advance, these posting occur on the first date of the fiscal period. If the fiscal period begins on 2020-01-01, all items are posted on 2020-01-01. If the lease has a Payment Scheduled value of In Arrears, these postings occur on the last date of the fiscal period. If the fiscal period is yearly and begins on 2020-01-01, all items are posted on 2020-12-31. This event is used to create consistent sub-ledger rules that can work for both leases paid in advance and in arrears.
Post as Credit or Debit	Choose Credit or Debit to indicate which field – Credit or Debit – the program should post the value.
Value to Post	Complete this field with the string holding the name of a value to post, such as `commencement-rou_asset_begin_bal` or `period-rou_asset_amort_exp`. These values are typically entries from the amortization table, or calculations on the amortization tables (such as, a calculation to find gain or loss between two schedules).