Transcription:

Welcome to training with VLU. This course is designed to cover the basics behind creating an Impairment remeasurement calculation in the Visual Lease lease accounting module. Our goal is to ensure you have what you need to gain compliance with the newest Accounting standards published by FASB, IASB and GASB.

By the end of this course, you will learn about:

• The location and importance of key lease accounting inputs.
• How to create an impairment remeasurement calculation for an existing calculation.

Please take a moment to review the agenda. If you are looking for a specific topic, feel free to navigate to the corresponding timestamp.

To get accurate information out of Visual Lease, we have to ensure we put complete and accurate data into it. That is especially true for lease accounting calculations, which pulls inputs from various fields within your lease record. The integrity of those inputs is critical to producing accurate calculations. Let’s review some together.

Before we get started it is important to note that the options shown on this screen may be different based on your configuration.

First, let’s visit the General Tab. In particular, the Record Type, Commencement and Expiration Dates are key inputs.

Record types will establish whether this is treated as a Lessor or Lessee record, and may also affect other treatments depending on your configuration.

The Commencement and Expiration Dates will serve as the default start and end dates to your lease accounting calculations.

Make sure to review and confirm these fields before building your calculations.

Now, let’s take a brief look at your financial entries. Let’s click on the Financials Tab. Underneath that, you’ll see a series of sub-tabs, you’ll look for Entries.

Financial entries are a key input into your accounting calculation. At a minimum, this could include base rent, but may include other items, including but not limited to end of lease costs.

Finally, let’s take a look at your lease options. You can find these in the Clauses tab. If they are marked as likely to be exercised, they will impact the term of your lease accounting calculations. Remember, though, we are entering new leases in this example. The threshold for “Likely to be Exercised” is fairly high, so it is unlikely to be met at inception unless the original lease term is quite short.

Now that we reviewed key information throughout the lease record, let’s take a look at remeasurement calculations. There are various type of remeasurement calculations you can generate within the lease accounting module, but for this video, we will focus on the impairment remeasurement calculation.

This type of remeasurement is required if there is a significant decrease or complete loss of value of the asset, or an event that damages the asset or reduces your ability to use the asset. In those cases, you will need to complete an impairment remeasurement.

You can find all of your created and stored calculations by selecting the Financials tab and then selecting lease accounting.

Let me show you around. All lease accounting actions can be completed by using the Create Calculations button on the top-right of the screen, and the Kebab in each row of a calculation, or by clicking here to edit, remeasure, or perform other actions for existing calculations.

But before we explore that further, let me show you the other areas of this module.
Beneath that, the screen breaks into various sections.

Additionally, in the left sidebar, the Accounting Information section contains basic lease information, that will impact all calculations on the lease.

Before we walk through creating an impairment remeasurement, a calculation must already exist on the lease.

To get started, find the calculation from the list you wish to complete a recalculation, and click here…to access the action menu. Select Create Remeasurement Calc from the list.

The Create Remeasurement Calculation window will open.

Please note: The financial entries used to calculate an impairment are in the same state as those used in the prior calculation being impaired. This is distinguished from a modification or termination, in which amounts may be different or additional expenses such as a termination penalty may be added.

Select Impairment from the Type of Remeasurement list, and then specify the effective date. Select either the Amount or Percentage of the impairment and then enter a value. Please note: The Amount cannot be greater than the ROU Asset Value at Remeasurement.

Once all the options have been selected, click Create Remeasurement.

You will see the Calculation Wizard appear which will walk you through each step of creating an Impairment.

The first step of the wizard is to specify the accounting standard I wish to apply. I can apply either the old or new standards for all three major standards. For this example, we’ll use the FASB 842 standard.
Then, you will specify the calculation status.

The first step of the calculation wizard you will need to specify the calculation status. Please note: Since this is an existing calculation the accounting standard is already selected and cannot be changed during a recalculation measurement. Therefore the standard drop-down list is inactive.
You will, however, need to specify the calculation status.

Pending status is typically what I recommend using at first, because that gives you the ability to review the lease schedules and journal entries before you activate the calculation. As a pending calculation, data will not flow through to your Accounting Feed, so you can feel confident that your calculation is set up correctly. You can then easily make it active.

Active is used to identify live calculations, which will enable them to flow through to your ERP system.
We also have the ability here to create hypothetical calculations. If you’re looking at various scenarios and want to do some “what if” analyses, but don’t have any intention of those ever being live calculations, hypothetical is a good way to segregate those calculations.

The Use Schedule Upload checkbox enables you to upload precalculated schedules (using a provided template) pertaining to rare scenarios that Visual Lease currently does not calculate, so they can be compared to Visual Lease-calculated schedules. You also have the option to upload the corresponding journal entries in the same template or have journal entries generated from the provided schedule. The uploaded schedule and journal entries will flow to the appropriate GL feeds. When selecting this option, you will have the opportunity to upload the template in step 6 of the wizard.

Please note: Some statuses cannot be assigned to a remeasurement calculation, depending on the status of the predecessor calculation. The platform will tell you if the status is valid in a message located here.

Once you make your selections, hit next to arrive at the next step of the wizard.

Step 2 will allow you to specify a calculation name and period. We recommend that you name your calculation to make it easily distinguishable. In this case we’re just using the default name.

The start date is the effective date you entered in the beginning of the remeasurement wizard and the End date defaults to the expiration date of the lease that can be found on the general tab.

Check “send to accounting feed” if you want the information sent to the ERP system when the status is moved to Active. Prorate Lease Payments typically will not have an impact on your numbers, but it applies in the rare event of the cash payment and accounting schedule prorating a period over different durations. Unchecking this box would prevent a double proration.

Once your selections are made, click save.

Once this is saved, you will see the rest of the panels on the Lease Accounting Page appear. The details of this calculation appear in the Calculations section.

You can also change the view by clicking on the pivot icon, here. This will switch the columns and rows giving you a list-type view that will not require as much horizontal scrolling.
In this view, the action menu will be located here, and is where you will be able to perform actions such as create a remeasurement calculation.

Note: The calculations section will default to the list type view.

Note that the impairment has a start date that you entered in the wizard.

When viewing the Impairment schedule you will see the new calculation including the amount or percentage loss of value to the asset.

You can also change the view by clicking on the pivot icon, here. This will switch the columns and rows giving you a list-type view that will not require as much horizontal scrolling.
In this view, the action menu will be located here, and is where you will be able to perform actions such as create a remeasurement calculation.

Note: The calculations section will default to the list type view.

If I select “Show More” you’re going to see all the inputs that went into creating this individual schedule.

Clicking Show More in the lease schedule will display all the necessary detail, including the lease payments, straight-line rent, right of use asset, amortization, interest and liabilities.

The schedule is then the basis of creating the Journal Entry Summary at the bottom of the page. The Journal Entries provide the linkage to feed these details to your ERP system.

Please note, though, that the description given here is NOT the GL account where the value will be posted, it is merely a system description. During your platform configuration, mappings were created which consider the description, the asset class, the accounting standard, and lease type, and then direct the values to the appropriate accounts in your General Ledger.

You can filter your journal entries by year by clicking here and selecting a year, or multiple years, or by entering a date range.

This concludes our course on an impairment remeasurement calculation. We’ve reviewed the data which are required to create your schedules, and how to create an impairment recalculation within the lease accounting module.

Remember…

• A calculation must exist on the lease in order for an impairment remeasurement calculation to be completed.
• You will need to run an impairment recalculation if there is a significant loss of value to the asset, including damage or usability.
• The amount or percentage of ROU Asset impairment cannot be greater than the ROU Asset Value at Remeasurement or you will receive an error message.

Thank you for attending this course. Any questions, suggestions, or feedback may be sent to support@visuallease.com.