Oracle JD Edwards released a new lease accounting standard that will change job functions for many leasing and financial professionals. Specifically, the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) have issued IFRS 16 and ASC 842 to make a critical change in lease management processes. According to the press release, “The effective date for public companies is starting with reporting periods beginning on or after December 15, 2018 and with private companies required reporting on or after December 15, 2019.”

According to Oracle’s presentation, this standard covers revenue recognition, lessor accounting for property and non-property as well as lessee accounting for property and non-property leases. Non-property leases refer to office and other types of equipment, from tractors to copy machines. A few additional factors covered include revenue recognition for real estate, as well as lessor and lessee accounting for real estate.

So how is JD Edwards handling lease accounting standards? These changes have been helpful in setting lease classifications, setting defaults, overriding lease classifications for each asset on a lease and specifying the effect on the lease liability and right-of-use (ROU) asset.

The basic version of how Oracle JD Edwards processes lessee accounting goes as follows:

1. Create units and assets associated with each unit
2. Create leases and associated assets
3. Set up recurring and manual billing for each asset
4. Create and review amortization schedules
5. Create initial lease liability and ROU Asset Journal entries
6. As lease payments are made, create journals to adjust lease liability.

Scott launches a demo to show how he creates amortization schedules, adds data to watchlists and more. When he talks about the transition to the new standard, Scott makes it very clear that you must first start setting your lease prior to implementing new standard.