Lease Accounting Training Manual

Lease Accounting

Contents Introduction ..................................................................................................... 4 Lease Terminology ............................................................................................ 5 Exceptions/Exclusions ....................................................................................... 7 Leases Agreements ........................................................................................... 8 Tools/Forms ................................................................................................... 11 Lessee/Supplier Contracts .................................................................................. 12 Lessee/Supplier Contract Process ...................................................................... 13 Contract Types – Lessee/Supplier Contracts ....................................................... 14 HOW TO: Operating Right of Use Asset Lease – Fixed Payment ............................. 16 HOW TO: Financed Purchase Lease – Fixed Payment ........................................... 19 HOW TO: Operating Right of Use Asset Lease -Variable Payment ........................... 22 HOW TO: Financed Purchase Lease – Variable Payment ........................................ 25 Receipts ........................................................................................................ 28 Lease Amendments ......................................................................................... 29 HOW TO: Create Supplier Contract Amendment to Extend a Lease......................... 31 HOW TO: Create Supplier Contract Amendment – Payment Change ....................... 32 Supplier Invoices for Lease Contracts ................................................................ 33 HOW TO: Generate Supplier Invoice from Supplier Invoice Installment Schedule .... 34 HOW TO: Manage Sales Tax on Lease Contract Supplier Invoices ......................... 36 HOW TO: Manage Use Tax on Lease Contract Supplier Invoices ............................. 37 HOW TO: Enter Non-Lease Component on Supplier Contract Invoices..................... 38 Supplier Invoice Adjustments ........................................................................... 39 Expense Recognition Accounting (Interest) for Lease Contracts ............................. 40 HOW TO: Generate Interest Acctg from Expense Recognition Installment Schedule . 41 Asset Disposals .............................................................................................. 42

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HOW TO: Lease Accounting Asset Disposal ......................................................... 43 HOW TO: Cancel a Lease Related Asset ............................................................. 44 Contract Cancellations ..................................................................................... 45 HOW TO: Re-enter a Previously Approved Lease ................................................. 46 Reports ......................................................................................................... 47 Lessor/Customer Contracts ................................................................................. 48 Lessor/Customer Contract Process .................................................................... 49 Customer Contract .......................................................................................... 50 HOW TO: Create Long Term Lease Customer Contract ......................................... 51 Billing Schedules............................................................................................. 54 HOW TO: Create Billing Schedules..................................................................... 55 Customer Invoices .......................................................................................... 57 HOW TO: Create a Customer Invoice from a Billing Schedule ................................ 58 Revenue Recognition Schedules ........................................................................ 59 HOW TO: Create Revenue Recognition Schedules ................................................ 60 HOW TO: Create Revenue Recognition Accounting ............................................... 61 Lease Amendments ......................................................................................... 62 Amendment Scenarios ..................................................................................... 63 HOW TO: Create Amendment for Long Term Lease Customer Contract ................... 64 Close a Customer Contract ............................................................................... 65 HOW TO: Cancel Long Term Lease Customer Contract ......................................... 66 Reports ......................................................................................................... 67 Resources ...................................................................................................... 68

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Introduction In June 2017, the Government Accounting Standards Board (GASB) issued Statement No. 87, Leases. GASB Statement No. 87 (GASB 87) increases the usefulness of governmental financial statements by requiring recognition of certain lease assets and liabilities, including those that previously were classified as operating leases and recognized as revenue by lessors and expenditures by lessees. These requirements go into effect in 2022.

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Lease Terminology Conveys Control: as specified in contract, must both have right to underlying assets:  

Present service capacity from use of the asset Determine nature and manner of use (right to direct how and for what purpose)

Exchange or Exchange-Like Transaction– when each party receives and gives up essentially equal values for the property being leased or sold.

Lease - contract that conveys control of the right to use (ROU) another entity’s nonfinancial asset (the underlying asset – building, land, infrastructure, and/or equipment) as specified in the contract for a period in an exchange or exchange-like transaction.

Lease Extension – a continuation of the original lease agreement (not a lease renewal) Lease Incentive – an inducement for a lessee to sign a lease (i.e., lessor agrees to take over remaining lease payments on existing lease(s), pay moving costs, or make cash payments to the lessee).

Lease-leaseback Transaction – Leased asset by one party to another party and then leased back to the first party (i.e., Developer constructed a building on County owned land. The constructed building is leased back to the County.)

Lease Renewal – a new lease agreement (not a lease extension) Lessee – a person (or entity) who holds the lease of a property; For example, the County is a tenant or rents a copier.

Lessor – a person (or entity) who leases or lets property to another Lease Term – The noncancelable period during which a lessee has a right to use a capital asset, plus periods covered by a lessee’s or lessor’s option to extend or terminate, if reasonably certain the option will be exercised, or termination will not be exercised.

Max Term – The noncancelable term plus all optional extensions regardless of probability to exercise extension options. Term used to identify short-term from longterm leases.

Noncancelable period – period which neither the lessor/lessee has right to terminate the lease OR only the lessor has the right to terminate. (Conversely cancelable period – both lessor or lessee has right to terminate the lease without permission from other party, such as a rolling month to month lease.)

Non-Lease Component – A distinct element of a contract not related to securing the use of the asset.

Purchase Option – right without obligation to purchase a leased asset at a certain price within a certain time period.

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Residual Value Guarantees – amount to be paid by the County to a lessor at the end of the lease term.

Right of Use (ROU) - The right to use a nonfinancial (capital) asset.

Sale-leaseback Transaction – County asset sold to a third party (buyer), then the asset is leased back to the County by the buyer.

Short Term Lease – a lease with a maximum possible lease term of 12 months or less, including any options to extend, regardless of probability to exercise extension options.

Sublease – County leases an asset to a third party the County is currently leasing as a lessee.

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Exceptions/Exclusions The following are exclusions or exceptions to GASB 87 requirements or Pierce County adopted policies. 

Short-term leases – Leases that have at the commencement of the lease, a maximum possible term of 12 months. The term includes the stated noncancelable periods plus any extensions regardless of probability of extending. Examples: o Rolling month to month leases and leases that continue into a holdover period until a new lease contract is signed. o Leases where both the lessee and lessor have the option to terminate without permission (such as with 30- or 60-days’ notice) from the other party.

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Contract threshold exclusions: o Land, Building, and Infrastructure: Right of Use Assets total contract less than $75,000 o Equipment: Lease term less than 5 years AND annual payment less than $10,000

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Leases where payment is less than fair market value (i.e., $1 monthly payment or payment is less than 80% of what could be collected to rent or lease asset at fair market value)

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Interfund Leases – Leases between departments or funds within the same government

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Intangible assets – Such as mineral rights, patents, software, copyrights.

Except for the sublease of an intangible right to use asset created by the original lease of the tangible underlying asset.

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Biological assets – Such as timber, living plants, living animals.

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Lease of Inventory - This includes items purchased for resell or consumption within the county. Note: if the item is on the annual Supply Inventory Report it is considered Inventory.

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Service Concession arrangements – County allows an operator to provide a public service using County owned assets. The operator collects and is compensated by fees. The County determines services and fees to be collected.

Assets commonly used in SCAs: roads, bridges, water and sewer, parking garages, golf courses, etc.



Assets financed with outstanding conduit debt – Unless both the asset and conduit debt are reported by the lessor (ex. Revenue Bonds or Debt for Capital Financing)

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Supply contracts – Such as power purchase agreements.

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Certain regulated leases – Such as aviation lease between airports and air carriers.

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Leases Agreements Types of Leases Right of Use Lease: A contract that conveys control of the right to use another entity’s nonfinancial asset* (the underlying asset) as specified in the contract for a period of time in an exchange or exchange like transaction.

A contract conveys control when the County has the right to: 1. Direct how and for what the purpose the asset is used AND 2. Obtain substantially all the economic benefits from the asset. * Examples of nonfinancial assets include buildings, land, infrastructure, and equipment.

Financed Purchase Agreement: A contract that transfers ownership of underlying asset to the County by the end of the contract and does not contain termination options.

Lease Term

Stated noncancelable lease period

Optional renewal periods if lessee is reasonably certain to exercise

Lease Term

Renewal Periods should be excluded where both the lessee and the lessor have an option to terminate without the permission from the other party. However, if only one party has the option to cancel, those periods should be included in the lease term.

Reasonably Certain – The lessee has a compelling economic reason to exercise the renewal or purchase option, or to not exercise a termination option. Consider all factors relevant to the assessment: 

Market based factors: Are you currently getting a good deal? If the terms of your current contract are better than the market conditions, then you will probably choose to renew your current contract if you have the option.

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Contract based factors: The cost to terminate the current lease and sign a new lease, which may include cancellation penalties, negotiation costs, relocation costs, and leasehold improvements.

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Asset-based factors: How essential is the asset to providing services – can you afford to not be able to use the asset, even for just a short period of time?

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

Government specific factors: Consider your history of exercising options to extend or terminate leases. If the County typically remains in the same building for 20 or more year, it is reasonably certain that the County would exercise the option to renew a 10-year lease for an additional 10 years.

If the lease term is longer than one budget period (i.e. biennium) in duration, advance approval by Finance, Executive and Council is required.

Interest Rates The lease rate is defined as the interest rate associated with leasing the asset during the lease period and can also be considered as the compensating amount which otherwise the lender would have earned if the same property/equipment/vehicle had been put in some other use. There are three types of interest rates associated with lease agreements.

Explicit Interest Rate – An Explicit Interest Rate is a rate clearly stated in the contract. Whenever possible, use the Explicit Interest Rate.

Implicit Interest Rate – An Implicit Interest Rate is a rate calculated using the following three pieces of information: the number of payments, the payment amount and the value of the asset (average price to buy if purchased). The Implicit Interest Rate should be used when the rate is not explicitly stated in the contract. If you are unable to obtain those three pieces of information and no explicit rate is stated in the contract, the Current Incremental Borrowing Rate should be used.

Implicit Rate Calculator Tool Incremental Borrowing Rate – The Incremental Borrowing Rate is an estimate of the rate of interest that would be charged for borrowing the lease payment amounts during the least term. It should be used when the Explicit Rate is not stated in the contract and the necessary information used to calculate the Implicit Rate is unavailable.

Incremental Borrowing Rate website

Initial Direct Costs An Initial direct cost is defined as the “incremental costs of a lease that would not have been incurred had the lease not been obtained.” They are ancillary costs incurred by the County that were necessary to place the asset in service.

For example, the County pays $2,000 for delivery and installation of the equipment being leased. Another example is cost incurred to reconfigure a space for the leased asset.

Costs excluded from initial direct costs, are any cost that would have been incurred even if the lease contract failed to execute. For example, costs (directly or indirectly) attributed to negotiating/drafting/etc. for the lease are not considered initial direct costs.

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Lease Incentives Lease incentives are enticements lessors provide to encourage lessees to sign a lease.

Payments / reimbursements made by a lessor to a lessee associated with lease.

For example, cash payments to the County from the lessor: Tenant Improvement Allowances given by lessor used by the County to improve space; Lessor “buying out” or “taking over” the lessee’s previous lease; Moving expense reimbursements.

Multiple ROU Assets A lease may include more than one ROU Asset. When a lease includes multiple Right of Use Assets, the department should attempt to identify the individual cost of each ROU asset.

Example: A lease that includes an office building and parking lot.

Total Contract Amount All costs associated with a lease must be included in the Total Contract Amount entered in Workday. The associated costs could be explicitly stated in the contract but may be included without a stated value.

If the contract runs out of funds during the term of the contract, the contract will likely have to be canceled and a new contract entered. A contract may only be amended to account for payment changes or an extension.

The Negotiator Checklist calculates the Total Contract Amount to be entered in Workday.

The Total Contract Amount will include: 

Lease Payments – Fixed or Variable Payments as stated in contract to lease asset including extension if reasonably certain to be exercised.

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Termination Penalties – include if termination option reasonably certain to be exercised

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Purchase Option/Residual Value Guarantees – if reasonably certain to be exercised

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Initial Direct Costs payable to the Supplier

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Usage Payments – dependent on usage of asset (# of copies, miles, hours, etc.)

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Non-Lease Components/Other Payments - services, common area maintenance, utilities, property taxes, sales tax, etc.

If a contract does not include amounts for items above, an estimate should be used to allocate the contract price to those components.

If non-lease components cannot be separated from the lease components, they should be included in the lease payment.

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Tools/Forms

Lessee (SC)

Lessor (CC)

Negotiator’s Checklist

X

X

Supplier Lease Contract Type

X

Supplier Contract Summary

X

Form

Description The Negotiator’s Checklist identifies information required for GASB 87 reporting that should be included in the contract. It should be used and completed by the department during contract negotiations/preparation.

The Supplier Lease Contract Type Form assists in determining the correct contract type to use.

X

The Supplier Contract Summary is a required when submitting any Supplier Contract.

Customer Lease Amortization Schedule Calculator

X

The Customer Lease Amortization Schedule Calculator is required for all Lease Customer Contracts and Customer Contract Amendments. It calculates Present Value, Contract Amount, Interest Schedules.

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Lessee/Supplier Contracts

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Lessee/Supplier Contract Process 1. Lease Negotiation •Completed by: Department •Form: Negotiator's Checklist (Required) •Prepare Contract 2. Prepare for Review/Submittal •Completed by: Department •Create Contract Summary (Required) •Form: Supplier Contract Type (Required) •Enter and submit in Workday 3. Contract Review •Completed by: Business Process reviewers/approvers 4. Collect Signatures •Completed by: Procurement and Contract Services •Collected via DocuSign 5. Schedules Created •Completed by: Workday Automated Process •Expense Recognition Installment Schedule created •Supplier Invoice Installment Schedule created 6. Supplier Contract Fully Receipted •Completed by: Workday Automated Process •Asset Registration/Assignment is Initiated 7. Asset Regristration/Assignment •Completed by: Business Process reviewers/approvers 8. Monthly •Completed by: Department •Create and submit Supplier Invoice •Create and submit Expense Recognition Accounting •Run Asset Depreciation 9. Period Close •Completed by: Department •Review and submit Contract Cancelations, as applicable •Review and submit Asset Disposals for Contracts at end of term

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Contract Types – Lessee/Supplier Contracts Use the Supplier Lease Contract Type form to help determine the correct contract type to use.

Fixed Payments Contracts The lease portion amount remains the same throughout the life of the agreement.

The usage/maintenance amount may change each month, but the base lease/rent amount is the same.

Type

Description

Operating ROU Asset Lease–Fixed Payment

Used when agreement gives lessee the right to occupy, operate or hold a leased asset during a specific time period. The asset is returned to the lessor at the end of the agreement.

Finance Purchase Lease – Fixed Payment

Used to acquire an asset by paying over its full term. At the conclusion of agreement, the County owns, or has the option to purchase the asset.

Variable Payment Contracts The base payment amount varies because of a change in factors or circumstances occurring after the commencement date or when multiple prepayments (i.e., first and last month’s payments) were made. Leases with free rent periods also fall in this category.

Type

Description

Operating ROU Asset Lease–Variable Payment

Used when agreement gives lessee the right to occupy, operate or hold a leased asset during a specific time period. The asset is returned to the lessor at the end of the agreement.

Financed Purchase Lease – Variable Payment

Used to acquire an asset by paying over its full term. At the conclusion of agreement, the County owns, or has the option to purchase the asset.

Contract Status Unlike non-lease contracts, lease contracts can only have one of two statuses after being fully executed: Approved or Canceled.

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Validations Critical: 

Expense Recognition Method must be Number of Days for Lease Contracts.

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Fund is invalid for Lease Contract Line

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Governmental and Proprietary Funds cannot be used together on Lease Contract.

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Intercompany is not allowed on Lease Contract.

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Lease Contracts should only be created if the ROU Asset amount is greater than $75,000

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Lease Spend Category can only be used if Contract Type is for a Lease Contract.

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Location is required for Lease Contract Lines.

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Quantity on Lease Contract Lines cannot be greater than 1. Add additional lines if necessary.

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Tax Applicability for Lease contract line must be Nontaxable.

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Company cannot be used on Lease Type contracts.

Warning: 

As the PC Department Accounting Manager, approving this Supplier Contract with a Short-Term Lease Spend Category indicates the agreement should not be entered as a Lease Contract.

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Lease Contracts greater than 5 years should have Council Ordinance Number.

Please add to Additional Data if applicable

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Short Term Lease Spend Categories should only be used on Supplier Contract if the lease agreement is for 12 months or less or meets a lease contract setup exclusion/exception. Otherwise, a Lease Contract must be created.

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Unit Residual Value is blank for Financial Lease Contract. Value should only be $0 if Asset will have no Residual Value after useful life. Please review and update if needed.

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Unit Residual Value should only be used for ROU Lease Contract if a guaranteed final payment is required as stated in the contract.

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Lease Contract should only be created for Equipment if term is 5 years AND a minimum of $10,000 per year.

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HOW TO: Operating Right of Use Asset Lease – Fixed Payment Create Contract 1.

Using Workday, enter Create Supplier Contract in Search box and select the task

Contract Information: 2.

3.

4.

5.

6.

7.

8.

9.

Enter Company Enter Supplier Select Contract Type from the drop-down menu a. Operating ROU Asset Lease – Fixed Payment Choose Create Blank Supplier Contract or Copy Details from an Existing Contract Select the Accounting Method a. ROU Asset Depreciation Expense must be selected Click OK Enter the Contract Name Enter the Contract Reference (optional)

Terms And Amounts 10. Enter the Start Date 11. Leave the Contract Signed Date blank 12. Enter the End Date 13. Enter the Total Contract Amount a. Enter the Total Contract Amount from the Negotiator’s Checklist Lease Details 14. Term a. Derived from Start Date and End Date entered 15. Enter the Payment Frequency 16. Enter the Interest Rate 17. Enter the Fixed Payment Amount 18. Enter the Initial Indirect Cost, if applicable 19. Enter the Lessor Incentive, if applicable a. NOTE: Entering an amount in the Lessor Incentive field prior to entering payment information will result in an error. Once the payment information is entered, then enter the lessor incentive. The error will go away so long as the value of the asset is greater than the value of the Lessor Incentive.

20. Accounting Method a. Derived from Accounting Method selected on prior screen 21. Check the Prepaid Lease Payment checkbox, if applicable a. Prepaid Lease Payment Date must be on or before the contract start date.

22. Automatically Generate Supplier Invoice Schedule and Installments a. Auto checked so schedules are created/approved with Supplier Contract.

Cannot be changed.

23. Automatically Generate Expense Recognition Schedule and Installments a. Auto checked so schedules are created/approved with Supplier Contract.

Cannot be changed.

24. Enter the Expense Recognition Method a. Must be Number of Days Lease Accounting – Supplier Contracts

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Supplier Invoice Defaults 25. Remit-To Connection, update if necessary 26. Payment Terms, update if necessary a. Can be changed to another payment option available to a particular Supplier. b. Payment types must be added to a Supplier Profile before they can be used 27. Enter Supplier Invoice Reference Number Contract Overview 28. Enter contract information/summary in Contract Overview Goods Lines 29. Enter unique Line Number 30. Enter brief Description 31. Enter Spend Category a. Available Spend Categories: i. Lease - Buildings [66.000200] ii. Lease - Equipment [66.000400] iii. Lease- Infrastructure [66.000300] iv. Lease – Land [66.000100] 32. Enter Tax Applicability a. Must be Nontaxable 33. Tax Code a. Must remain blank 34. Enter Percentage, if necessary a. If multiple Goods Lines are entered, provide a Percentage between 1 and 99 on each line, all lines totaled must equal 100% b. Percentages must be a whole number. Decimals are not allowed.

35. Quantity a. Must remain “1” 36. Enter Unit of Measure a. Choose “Each” 37. Unit Residual Value a. Should remain “0” unless Financed Purchase Lease 38. Unit Cost a. Derived from Quantity and Unit of Measure 39. Extended Amount a. Derived from Quantity and Unit Cost 40. Enter Worktags a. Required: Cost Center, Fund, Business Unit and Additional Worktag: Location If there is not a Worktag for i. See FIN0580 (Business Unit Set Up) to your Location, please email locate the correct Business Unit for WORKDAYFINANCIALS. function, must be a 591xxPx ii. Optional: Project, Program iii. Gran t worktags are not supported Attachments 41. Add Attachments, including but not limited to: Lease Accounting – Supplier Contracts

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a. b. c. d. e. f. g. h. i.

Contract Negotiator’s Checklist Contract Summary Implicit Rate Worksheet, if applicable Incremental Borrowing Rate document, if applicable Insurance, if applicable Supplier Contract Lease Type, if completed Evidence of Council approval, if required Any other supporting documentation

Additional Data (if applicable, click “Save for Later” to enter information) 42. Enter Termination Penalty amount, if applicable a. From Related Actions on Supplier Contract, select Additional Data>Edit b. Custom Object field, enter Termination Penalty, Click OK c. Enter Termination Penalty amount, Currency USD 43. Click OK, Click Done Submit Contract 44. Click Submit a. Note if additional data entered, from Related Actions on Supplier Contract, select Supplier Contract>Edit. Then Click Submit

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HOW TO: Financed Purchase Lease – Fixed Payment Create Contract 1.

Access the Create Supplier Contract Task

Contract Information 2.

3.

4.

5.

6.

7.

8.

Enter Company Enter Supplier Select Contract Type from the drop-down menu a. Financed Purchase Lease – Fixed Payment Choose Create Blank Supplier Contract or Copy Details from an Existing Contract Click OK Enter the Contract Name Enter the Contract Reference (optional)

Terms And Amounts 9. Enter the Start Date 10. Leave the Contract Signed Date blank 11. Enter the End Date 12. Enter the Total Contract Amount a. Enter the Total Contract Amount from the Negotiator’s Checklist Lease Details 13. Term a. Derived from Start Date and End Date entered 14. Enter the Payment Frequency 15. Enter the Interest Rate 16. Enter the Fixed Payment Amount 17. Enter the Initial Indirect Cost, if applicable 18. Enter the Lessor Incentive, if applicable a. NOTE: Entering an amount in the Lessor Incentive field prior to entering payment information will result in an error. Once the payment information is entered, the error will go away so long as the value of the asset is greater than the value of the Lessor Incentive.

19. Check the Prepaid Lease Payment checkbox, if applicable a. Prepaid Lease Payment Date must be on or before the contract start date.

20. Automatically Generate Supplier Invoice Schedule and Installments a. Auto checked so schedules are created/approved with Supplier Contract.

Cannot be changed.

21. Automatically Generate Expense Recognition Schedule and Installments a. Auto checked so schedules are created/approved with Supplier Contract.

Cannot be changed.

22. Enter the Expense Recognition Method a. Must be Number of Days Supplier Invoice Defaults 23. Remit-To Connection, update if necessary Lease Accounting – Supplier Contracts

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24. Payment Terms, update if necessary a. Can be changed to another payment option available to a particular Supplier. b. Payment types must be added to a Supplier Profile before they can be used 25. Enter Supplier Invoice Reference Number Contract Overview 26. Enter contract information/summary in Contract Overview Goods Lines 27. Enter unique Line Number 28. Enter brief Description 29. Enter Spend Category a. Available Spend Categories: i. Lease - Buildings [66.000200] ii. Lease - Equipment [66.000400] iii. Lease - Infrastructure [66.000300] iv. Lease – Land [66.000100] 30. Enter Tax Applicability a. Must be Nontaxable 31. Tax Code a. Must remain blank 32. Enter Percentage, if necessary a. If multiple Goods Lines are entered, provide a Percentage between 1 and 99 on each line, all lines totaled must equal 100% b. Percentages must be a whole number. Decimals are not allowed.

33. Quantity a. Must remain “1” 34. Enter Unit of Measure a. Choose “Each” 35. Unit Residual Value, if applicable a. Should remain “0” unless Financed Purchase Lease 36. Unit Cost a. Derived from Quantity and Unit of Measure 37. Extended Amount a. Derived from Quantity and Unit Cost 38. Enter Worktags a. Required: Cost Center, Fund, Business Unit and Additional Worktag: Location i. See FIN0580 (Business Unit Set Up) to If there is not a Worktag for locate the correct Business Unit for your Location, please email function, must be a 591xxPx WORKDAYFINANCIALS. b. Optional: Project, Program c. Grant worktags are not supported Attachments 39. Add Attachments, including but not limited to: a. Contract b. Negotiator’s Checklist c. Contract Summary Lease Accounting – Supplier Contracts

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d. e. f. g. h. i.

Implicit Rate Worksheet, if applicable Incremental Borrowing Rate document, if applicable Insurance, if applicable Supplier Contract Lease Type, if completed Evidence of Council approval, if required Any other supporting documentation

Additional Data (if applicable, click “Save for Later” to enter information) 40. Enter Termination Penalty amount, if applicable a. From Related Actions on Supplier Contract, select Additional Data>Edit b. Custom Object field, enter Termination Penalty, Click OK c. Enter Termination Penalty amount, Currency USD d. Click OK, Click Done Submit Contract 41. Click Submit a. Note if additional data entered, from Related Actions on Supplier Contract, select Supplier Contract>Edit. Then Click Submit

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HOW TO: Operating Right of Use Asset Lease -Variable Payment Create Contract 1.

Access the Create Supplier Contract Task

Contract Information 2.

3.

4.

Enter Company Enter Supplier Select Contract Type from the drop-down menu a. Operating ROU Asset Lease – Variable Payment 5. Choose Create Blank Supplier Contract or Copy Details from an Existing Contract 6. Select the Accounting Method a. ROU Asset Depreciation Expense must be selected 7. Select the Payment Frequency 8. Enter the Start Date 9. Enter the End Date 10. Check Prepaid Lease Amount, if applicable 11. Enter First Payment Installment Date, if applicable a. Includes any rent-free installment dates b. Must be between the Contract Start Date and Contract End Date c. Don’t include any prepaid lease payments made on or before the contract start date.

12. Additional Payment, DO NOT CLICK ON THIS BOX 13. Click OK 14. Enter the Contract Name 15. Enter the Contract Reference (optional) Terms And Amounts 16. Leave the Contract Signed Date blank 17. Enter the Total Contract Amount a. Enter the Total Contract Amount from the Negotiator’s Checklist Lease Details 18. Term a. Derived from Start Date and End Date entered on prior screen 19. Payment Frequency a. Derived from previous entry 20. Enter the Interest Rate 21. Enter the Initial Indirect Cost, if applicable 22. Enter the Lessor Incentive, if applicable a. NOTE: Entering an amount in the Lessor Incentive field prior to entering payment information will result in an error. Once the payment information is entered, the error will go away so long as the value of the asset is greater than the value of the Lessor Incentive.

23. Accounting Method a. Derived from Accounting Method selected on prior screen 24. Prepaid Lease Payment checkbox Lease Accounting – Supplier Contracts

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a. Derived from entry on previous screen 25. Automatically Generate Supplier Invoice Schedule and Installments a. Auto checked so schedules are created/approved with Supplier Contract.

Cannot be changed.

26. Automatically Generate Expense Recognition Schedule and Installments a. Auto checked so schedules are created/approved with Supplier Contract.

Cannot be changed.

27. Enter the Expense Recognition Method a. Must be Number of Days Supplier Invoice Defaults 28. Remit-To Connection, update if necessary 29. Payment Terms, update if necessary a. Can be changed to another payment option available to a particular Supplier. b. Payment types must be added to a Supplier Profile before they can be used 30. Enter Supplier Invoice Reference Number a. Prints on payment Contract Overview 31. Enter contract information/summary in Contract Overview Payment Information 32. Enter the Payment Date and Amount for each payment a. If Prepaid was selected, those payments must also be entered Goods Lines 33. Enter unique Line Number 34. Enter brief Description 35. Enter Spend Category a. Available Spend Categories: i. Lease - Buildings [66.000200] ii. Lease - Equipment [66.000400] iii. Lease- Infrastructure [66.000300] iv. Lease – Land [66.000100] 36. Enter Tax Applicability a. Must be Nontaxable 37. Tax Code a. Must remain blank 38. Enter Percentage, if necessary a. If multiple Goods Lines are entered, provide a Percentage between 1 and 99 on each line, all lines totaled must equal 100% b. Percentages must be a whole number. Decimals are not allowed.

39. Quantity a. Must remain “1” 40. Enter Unit of Measure a. Choose “Each” 41. Unit Residual Value, if applicable a. Should remain “0” unless Financed Purchase Lease 42. Unit Cost Lease Accounting – Supplier Contracts

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a. Derived from Quantity and Unit of Measure 43. Extended Amount a. Derived from Quantity and Unit Cost 44. Enter Worktags a. Required: Cost Center, Fund, Business Unit and Additional Worktag: Location i. See FIN0580 (Business Unit Set Up) to If there is not a Worktag for locate the correct Business Unit for your Location, please email function, must be a 591xxPx WORKDAYFINANCIALS. b. Optional: Project, Program c. Grant worktags are not supported Attachments 45. Add Attachments, including but not limited to: a. Contract b. Negotiator’s Checklist c. Contract Summary d. Implicit Rate Worksheet, if applicable e. Incremental Borrowing Rate document, if applicable f. Insurance, if applicable g. Supplier Contract Lease Type, if completed h. Evidence of Council approval, if required i. Any other supporting documentation Additional Data (if applicable, click “Save for Later” to enter information) 46. Enter Termination Penalty amount, if applicable a. From Related Actions on Supplier Contract, select Additional Data>Edit b. Custom Object field, enter Termination Penalty, Click OK c. Enter Termination Penalty amount, Currency USD d. Click OK, Click Done Submit Contract 47. Click Submit a. Note if additional data entered, from Related Actions on Supplier Contract, select Supplier Contract>Edit. Then Click Submit

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HOW TO: Financed Purchase Lease – Variable Payment Create Contract 1.

Access the Create Supplier Contract task

Contract Information: 2.

3.

4.

Enter Company Enter Supplier Select Contract Type from the drop-down menu a. Select Financed Purchase Lease – Variable Payment 5. Choose Create Blank Supplier Contract or Copy Details from an Existing Contract 6. Select the Payment Frequency 7. Enter the Start Date 8. Enter the End Date 9. Check Prepaid Lease Amount, if applicable 10. Enter First Payment Installment Date, if Prepaid Lease Amount was checked a. Includes any rent-free installment dates b. Must be between the Contract Start Date and Contract End Date c. Don’t include any prepaid lease payments made on or before the contract start date.

11. Check Additional Payment, DO NOT CLICK ON THIS BOX 12. Click OK 13. Enter the Contract Name 14. Enter the Contract Reference (optional) Terms And Amounts 15. Leave the Contract Signed Date blank 16. Enter the Total Contract Amount a. Enter the Total Contract Amount from the Negotiator’s Checklist Lease Details 17. Term a. Derived from Start Date and End Date entered on prior screen 18. Payment Frequency a. Derived from previous entry 19. Enter the Interest Rate 20. Enter the Initial Indirect Cost, if applicable 21. Enter the Lessor Incentive, if applicable a. NOTE: Entering an amount in the Lessor Incentive field prior to entering payment information will result in an error. Once the payment information is entered, the error will go away so long as the value of the asset is greater than the value of the Lessor Incentive.

22. Prepaid Lease Payment checkbox a. Derived from entry on previous screen 23. Automatically Generate Supplier Invoice Schedule and Installments a. Auto checked so schedules are created/approved with Supplier Contract.

Cannot be changed.

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24. Automatically Generate Expense Recognition Schedule and Installments a. Auto checked so schedules are created/approved with Supplier Contract.

Cannot be changed.

25. Enter the Expense Recognition Method a. Must be Number of Days Supplier Invoice Defaults 26. Remit-To Connection, update if necessary 27. Payment Terms, update if necessary a. Can be changed to another payment option available to a particular Supplier. b. Payment types must be added to a Supplier Profile before they can be used 28. Enter Supplier Invoice Reference Number a. Prints on payment Contract Overview 29. Enter contract information/summary in Contract Overview Payment Information 30. Enter the Payment Date and Amount for each payment a. If Prepaid was selected, those payments must also be entered Goods Lines 31. Enter unique Line Number 32. Enter brief Description 33. Enter Spend Category a. Available Spend Categories: i. Lease - Buildings [66.000200] ii. Lease - Equipment [66.000400] iii. Lease- Infrastructure [66.000300] iv. Lease – Land [66.000100] 34. Enter Tax Applicability a. Must be Nontaxable 35. Tax Code a. Must remain blank 36. Enter Percentage, if necessary a. If multiple Goods Lines are entered, provide a Percentage between 1 and 99 on each line, all lines totaled must equal 100% b. Percentages must be a whole number. Decimals are not allowed.

37. Quantity a. Must remain “1” 38. Enter Unit of Measure a. Choose “Each” 39. Unit Residual Value, if applicable a. Should remain “0” unless Financed Purchase Lease 40. Unit Cost a. Derived from Quantity and Unit of Measure 41. Extended Amount a. Derived from Quantity and Unit Cost 42. Enter Worktags Lease Accounting – Supplier Contracts

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a.

b. c.

Required: Cost Center, Fund, Business Unit and Additional Worktag: Location i. See FIN0580 (Business Unit Set Up) to locate the correct Business unit for If there is not a Worktag for function, must be a 591xxPx your Location, please email Optional: Project, Program WORKDAYFINANCIALS. Grant worktags are not supported

Attachments 43. Add Attachments, including but not limited to: a. Contract b. Negotiator’s Checklist c. Contract Summary d. Implicit Rate Worksheet, if applicable e. Incremental Borrowing Rate document, if applicable f. Insurance, if applicable g. Supplier Contract Lease Type, if completed h. Evidence of Council approval, if required i. Any other supporting documentation Additional Data (if applicable, click “Save for Later” to enter information) 44. Enter Termination Penalty amount, if applicable a. From Related Actions on Supplier Contract, select Additional Data>Edit b. Custom Object field, enter Termination Penalty, Click OK c. Enter Termination Penalty amount, Currency USD d. Click OK, Click Done Submit Contract 45. Click Submit a. Note if additional data entered, from Related Actions on Supplier Contract, select Supplier Contract>Edit. Then Click Submit

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Receipts A lease contract must be fully received in order to initiate the creation of an Asset.

There is an automated process that will create receipts for Lease Contracts in Approved status. The process runs every day at 9pm.

Alternately, you may also manually create a receipt from the related actions of the contract or the Create Receipt task.

Receipts cannot be created if the Supplier Contract is future dated or if the Supplier Contract’s Initial Recognition of Lease Operation Journal is not in Posted Status.

A lease contract cannot be partially received.

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Lease Amendments An amendment can be created when the three conditions below have been met: 1. The contract is in ‘Approved’ status.

2. All lines have been fully receipted.

3. All Assets have been registered and Assign Accounting completed.

There are two amendment types for Lease contracts: Type

Description

Payment Change

Use this Amendment Type for a change in the Fixed/Variable Payment Contracts or the lessors explicitly stated Interest Rate.

(An amendment is required solely for a change in index or rate used to determine variable payments if the change does not impact the liability amount significantly. For example, a consumer price index or incremental borrowing rate change would not require an amendment. An ad hoc line would be added to the supplier invoice when created to account for difference.)

Lease Extension

As the name suggests, use this amendment type when extending a lease.

Please email PCAccounting@piercecountywa.gov with “SC-xxxxx and ASSET-xxxxxx amendment” in the subject header if there is a change in 1.) Residual Value Guarantee or 2.) Purchase Options.

The following fields can be modified: Payment Change

Lease Extension

Required

Required

 

Fixed/Variable Payment Amount



Payment Information Payment Amount

Total Contract Amount

 

Total Contract Amount

Optional: 

Contract Name



Interest Rate



Remit-To Connection



Override Payment Type



Contract Overview



Attachments

Lease Accounting – Supplier Contracts

Optional: 

Contract Name



Interest Rate



Remit-To Connection



Override Payment Type



Contract Overview



Attachments

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Contract Review After a contract amendment has been submitted, a draft schedule is created to assist in the review process. To view the schedule, hover your mouse next to the schedule name and click on the icon. A new window with the draft schedule will open.

Lease Amendment Versions Upon completion of an amendment, you can view the Amendment Versions on the Lease Amendment Versions tab of the contract.

Things to note: 

You cannot enter two amendments that have a signed date in the same fiscal period.



Consumer Price Index (CPI) Payment changes must be manually updated on Supplier Invoices by adding an ad hoc line to the created Supplier Invoice from the installment schedule.



After submittal, Worktags cannot be updated.

Validations Critical 

Fund is invalid for Lease Contract Line.



Lease Spend Category can only be used if Contract Type is for a Lease Contract.



Location is required for Lease Contract Lines.

Warnings 

As the PC Department Accounting Manager, approving this Supplier Contract with a Short Term Lease Spend Category indicates the agreement should not be entered as a Lease Contract.



Lease Contracts greater than 5 years should have Council Ordinance Number.

Please add to Additional Data if applicable.

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HOW TO: Create Supplier Contract Amendment to Extend a Lease Process Steps: 1.

2.

3.

4.

Open Supplier Contract From Related Actions select Create Lease Amendment Select Amendment Type: Lease Extension Enter Amendment Signed Date a. This date will be the Accounting Date for the Operational Journal i. Must be in open period. ii. Cannot be dated in the same Fiscal Period as the Supplier Contract Start Date iii. Cannot be dated before a previous lease amendment iv. Cannot be in the same period as a previous lease amendment v. Cannot be future dated 5. Enter Lease Liability Reassessment Date a. This date defaults to the first of the month or first date of the period of the Amendment Signed Date.

6. Enter Payment Effective Date 7. Enter Contract End Date a. Date should be the last day of the extension period b. If End Date is entered for mid period, a warning will trigger when Contract Amendment is submitted: Cancel and recreate the contract. If you want to include a partial payment period, select a contract type that uses variable payment frequency. A partial payment period on a fixed payment frequency generates an extra installment at the full fixed payment amount.

8. Enter Amendment Description 9. Enter Amendment Number 10. Click OK then Done 11. For Variable Payment Contracts a. Lease Details i. Update the Interest Rate, if necessary b. On the Payment Information Tab: i. Enter the Payment Dates and Amount for each installment c. Update the Total Contract Amount 12. For Fixed Payment Contracts a. Lease Details i. Update the Fixed Payment Amount, if necessary ii. Update the Interest Rate, if necessary b. Header i. Update the Total Contract Amount 1. Amount must be equal to or greater that the Total Lease Payments amount 13. Upload Attachments 14. Click Submit

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HOW TO: Create Supplier Contract Amendment – Payment Change Process Steps: 1.

2.

3.

Open Supplier Contract From Related Actions select Create Lease Amendment Select one of the Contract Amendment Types a. Payment Change 4. Enter Amendment Signed Date a. Will be the Accounting Date for the Operational Journal i.

Must be in open period ii. Cannot be dated in the same Fiscal Period as the Supplier Contract Start Date iii. Cannot be dated before a previous lease amendment iv. Cannot be in the same period as a previous lease amendment v. Cannot be future dated 5. Enter Lease Liability Reassessment Date 6. Enter Payment Effective Date 7. Enter Amendment Description 8. Enter Amendment Number 9. Click OK then Done 10. For Variable Payment Contracts a. Lease Details i. Update the Interest Rate, if necessary b. On the Payment Information Tab: i. Enter the Payment Dates and Amount for each installment c. Header i. Update the Total Contract Amount 11. For Fixed Payment contracts a. Lease Details i. Update the Fixed Payment Amount (required) ii. Update the Interest Rate, if necessary b. Header i. Update the Total Contract Amount 1. Amount must be equal to or greater that the Total Lease Payments amount 12. Upload Attachments 13. Click Submit

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Supplier Invoices for Lease Contracts Lease accounting in Workday automatically generates the Supplier Invoice Schedule and Expense Recognition Schedule from supplier contracts. This process facilitates in providing accurate financial data calculations and tracking for financial reporting and compliance.

Supplier Invoice Schedule cannot be modified. If there is an error in the schedule you must cancel the contract and create a new contract.

Validations - Lease related Supplier Invoices Critical: 

Capital Asset spend categories cannot be used on lease related transaction.



Intercompany transactions are not allowed for Lease Contract related invoices.



Lease Spend Category can only be used with a Supplier Lease Contract.



Lines with Short Term Lease Spend Categories must be created from Purchase Orders or Supplier Contracts.



Location is required on Lease Contract Payments.



Spend Category 45.000570 and 45.000560 can only be used for Lease tax purposes.



Supplier Invoice related to Long Term Leases - Ad Hoc Line cannot have business unit that starts with 591XXXX

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HOW TO: Generate Supplier Invoice from Supplier Invoice Installment Schedule When Supplier Contracts are Fully Approved a Supplier Invoice Installment Schedule is automatically created to facilitate processing of Supplier Invoices. Supplier Invoices cannot be created manually, rather they will need to be created from the installment schedules based on the billing frequency (Monthly, Quarterly, Annually).

The Supplier Invoice Schedule can be viewed from the Contract on the Schedules tab.  

Schedule Information will reflect the supplier and remit to connection from the contract.

Generate Installment Information illustrates billing frequency and dates for supplier invoices as well as all Lease terms.

Installment schedules are not available when an amendment is in process.

Process Steps: 1.

2.

3.

4.

5.

6.

Open Supplier Contract.

Move to Schedules tab.

Open the Schedule for “Supplier Invoices” Select related action from the Installment Select > Supplier Invoice Installment > Create Supplier Invoice Review the Confirmation details a. Auto Submit is automatically selected. i. If Non-Lease components (ex. usage, CAM, or utilities) or sales tax will be paid, uncheck the Auto Submit checkbox. See step 12 below. ii. If Auto Submit is selected, the system will attempt to Submit into the business process. iii. Supplier Invoice will be left in ‘Draft’ status if there are any outstanding exceptions on the Supplier Invoice. These will need to be monitored by Departments. iv. If the associated contract line is not marked as Nontaxable, a Supplier Invoice automatically submitted will err and go to Draft status. b. All other installment defaults i. Information is pulled from the Supplier Contract. If any of these values are not correct you will need to manage the change on the Supplier Contract.

7. Select OK button 8. Process for Create Supplier Invoice from Supplier Contract will be displayed 9. Select Refresh button 10. Open Supplier Invoice to verify status is In Progress OR Review Installment Schedule to verify status. a. If not ‘In Progress”, edit Supplier Invoice as necessary.

11. If there are non-lease components or taxes to be paid, add ad hoc line(s) to record the additional spend (costs).

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You can create multiple Supplier Invoices from the Installment Schedule using the Create Supplier Invoices for Supplier Contract Installment Task.

1.

Access the Create Supplier Invoices for Supplier Contract Installment a. Enter criteria to find supplier installments b. Select the installment(s) c. Click OK d. Review Confirmation e. Click OK f. Click Refresh g. Go to step 7 above

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HOW TO: Manage Sales Tax on Lease Contract Supplier Invoices Lease payment Lines cannot be marked as Taxable. In order to identify that tax is being included and paid it must be entered as a separate line that does not contain the reference to the supplier contract.

Process Steps: 1.

2.

3.

4.

Open Supplier Invoice created from Supplier Invoice Installment Schedule Add additional Line to record Sales Tax Amount a. Enter Spend Category i. Must be Long Term Lease Equipment Sales Tax [45.000570] b. Tax Applicability i. Must be Nontaxable c. Extended Amount i. Enter sales tax amount d. Memo i. Enter the SC Number e. All worktags need to be the same as the original line except Business Unit. i. Use standard operating functional Business Unit Add additional lines, if necessary.

Click Submit.

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HOW TO: Manage Use Tax on Lease Contract Supplier Invoices Process Steps: 1.

2.

3.

4.

Open Supplier Invoice created from Supplier Invoice Installment Schedule Add 2 additional Lines for recording Use Tax Amount a. Add 1st Line for the Use Tax i. Assign Spend Category: Use Tax Payable [229510] ii. This line needs to be Nontaxable iii. The Extended amount needs to be the Use Tax amount and must be negative iv. Enter the Supplier Contract number in the Memo field v. All worktags need to be the same as the original line (Cost Center, Fund, Business Unit, Location) b. Add 2nd Line for the Offset for Use Tax Payable i. Assign a Spend Category specific to Use Tax for Lease Contracts: Long Term Lease Equipment Use Tax [45.000560] ii. Tax Applicability field: Enter Nontaxable iii. The Extended amount needs to be the Use Tax amount iv. Enter the Supplier Contract number in the Memo field v. All worktags need to be the same as the original line except Business Unit.

1. Use standard operating functional Business Unit Add additional lines, if necessary.

Click Submit.

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HOW TO: Enter Non-Lease Component on Supplier Contract Invoices Process Steps: 1.

2.

3.

4.

Open Supplier invoice created from Supplier Invoice Installment Schedule Add additional Line for recording non lease component. If you have more than one non-lease component, add a line for each. a. Enter Line Number b. Enter Spend Category i. Electricity 47.0002 ii. Water 47.0003 iii. Long Term Lease Termination Penalties [45.000580] iv. Long Term Lease Usage Costs [45.000585] v. Long Term Lease Initial Direct Costs [45.000590] vi. Lease Operating Expense Recovery/Common Area Maintenance [45.000595] vii. Additional Spend Categories will be added in order to track lease related expenses c. Tax Applicability i. Choose Non-Taxable or Taxable d. Extended Amount i. Enter amount of non-lease component ii. Enter all applicable worktags: Cost Center, Fund (same as original line) and Business Unit (non-591xxx). Optional worktags: Project and Program. e. Memo i. Enter the SC Number ii. Enter comment stating what the expense is Add additional lines, if necessary.

Click Submit.

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Supplier Invoice Adjustments The following fields can be modified via a Supplier Invoice adjustment on the Supplier Invoice line associated with a lease contract. 

Ship-To



Tax Applicability



Tax Code



Withholding Tx Code



Memo

All fields on an Ad Hoc line related to a lease supplier contract may be modified.

Validations - Lease related Supplier Invoice Adjustment Critical: 

Capital Asset spend categories cannot be used on lease related transactions.



Intercompany not allowed for lease payments.



Lease Spend Category can only be used with a Supplier Lease Contract



Lines with Short Term Lease Spend Categories must be created from Purchase Orders or Supplier Contracts

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Expense Recognition Accounting (Interest) for Lease Contracts Lease accounting in Workday automatically generates the Supplier Invoice Schedule and Expense Recognition Schedule from supplier contracts. This process facilitates in providing accurate financial data calculations and tracking for financial reporting and compliance.

Expense Recognition Schedule cannot be modified. If there is an error in the schedule you must cancel the contract and create a new contract.

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HOW TO: Generate Interest Acctg from Expense Recognition Installment Schedule When Supplier Contracts are Fully Approved an Expense Recognition Installment Schedule is automatically created to facilitate accounting to post interest expense.

Expense recognition interest cannot be created manually. It is created from the installment schedules Installment schedules are not and posted monthly.

The Expense Recognition Schedule can be viewed from the Contract on the Schedules tab.

available when an amendment is in process.

To create Expense Recognition Accounting for a single schedule: Process Steps: 1.

2.

3.

4.

5.

6.

Open Supplier Contract.

Move to Schedules tab.

Open the Schedule for “Expense Recognition” Select related action from the Installment Select > Expense Recognition Installment > Create Expense Recognition Accounting Click OK View Accounting from Installment related actions > Expense Recognition Installment > View Accounting, verify Status “Posted” OR Review Installment Schedule to verify status “Complete”.

You can generate Expense Recognition Accounting for multiple schedules using the Create Expense Recognition Accounting Task.

1. Access Create Expense Recognition Accounting Task a. Enter criteria to find available installments b. Select the Expense Recognition Installments c. Click OK d. Review Confirmation e. Click OK f. Go to step 7 above

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Asset Disposals When a contract reaches the end of term, an Asset Disposal should be initiated.

The only Disposal Method allowed for a lease related asset is “Lease Terminated”. If a Disposal method other than “Lease Terminated” is selected, the disposal event will not be able to fully be processed and will remain in initiator’s Workday inbox. The disposal event process will need to be canceled and a new disposal must be created.

Validations for Lease Asset Disposals Critical: 

Disposal Type of Lease Terminated can only be used for Assets from Supplier Lease Contracts



Disposal Worktags must match Asset Worktags. If needed a Transfer can be completed before Disposal to update Worktags if Asset is not related to a Lease Contract.

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HOW TO: Lease Accounting Asset Disposal Assets related to a Lease contract cannot be Removed, they may only be Disposed.

Assets related to a Lease contract can be Disposed of when the contract has been canceled or when a contract has expired.

Process Steps 1.

2.

3.

4.

5.

6.

7.

8.

Search ASSET-XXXXX Attach supporting disposal documentation to Asset if reason for disposal is other than contract term end date. a. If contract term end date reason for disposal, include in comment box contract SC-xxxxx ended, term period end date xx/xx/xxxx. b. If contract canceled early, attach documentation for early cancelation.

Process Disposal a. Related Actions > Business Asset > Dispose Enter Information a. Transaction Effective Date is the first day of the next month the contract is active. It should be dated for the next month after the term period end date in comment section, step c below. i. If at end of contract, it is next month after the contract end date ii. If contract ended early, it is the next month after the contract is active/asset able to be used. iii. Depreciation will not post accurately if processed in same month as the contract end date. DISPOSAL EVENT WILL NEED TO BE CANCELED AND REENTERED IF INCORRECT DATE USED. b. Disposal Type i. MUST BE Lease Terminated c. Add Comment i. If contract term end date reason for disposal, include in comment box contract SC-xxxxx ended, term period end date xx/xx/xxxx, disposal effective date is the following month. ii. If contract canceled early, include contract SC-xxxxx ended and why canceled early with contract end date.

Disposal Fair Market Value a. Leave blank Sales Prices: a. Leave Blank Percent to Dispose/Cost to Dispose a. Leave at default value Click Submit

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HOW TO: Cancel a Lease Related Asset If an Asset Disposal or Removal Event has a Status of Error, Denied, or was submitted with a field that is not allowed, you must cancel the event.

Process Steps 1.

2.

3.

4.

5.

6.

7.

8.

Open the Asset Click on the Process History tab Go to the last event of the Process Click on Related Actions for the Asset Disposal Event Or Asset Removal Event, as applicable For a Denial a. Click on Business Process > Delete For an erroneous entry a. Click on Business Process > Cancel Enter a Comment, if required Click Submit

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Contract Cancellations Once fully executed, canceling a Lease Contract has substantial trick-down effect.

Cancelations cannot be future dated to leave installments available or back dated to reverse installments that have been processed. Once a contract cancellation has been initiated the status of unused installments will change from available to canceled.

Department Responsibilities 1.

Verify the last Installment and Expense Recognition Schedule match.

Central Accounting Responsibilities 1.

Manual Journals to move accounting.

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HOW TO: Re-enter a Previously Approved Lease This procedure should be followed when a lease agreement has a simple data entry error. If the error results in a contract increase that causes the contract total to exceed $250,000, it will need to go through the full BP. Follow the How To for the appropriate contract type.

There are two instances here the ‘copy’ function may not be available. If the contract type is ‘Variable’ and the dates were entered incorrectly, you will have to create a new contract using the Create Supplier Contract task. Second, if a contract that has been amended, you will not have the option to copy it.

Process Steps: 1.

2.

3.

4.

5.

Locate the contract to be copied Related Actions > Supplier Contract > Copy Verify that you’ve selected the correct contract to copy.

Click OK Enter Contract Name a. This should be the same name as the version you’ve copied unless the contract name was incorrect 6. Enter original contract previously approve in Contract Reference field 7. Enter the Supplier Invoice Reference Number 8. Make corrections 9. Add Attachments a. Include all attachment from the copied contract. Additional attachments may be added.

10. Enter a Comment explaining why the new contract is required.

11. Click Save for Later a. NOTE: If you click Submit you will have to restart this process.

12. Contract PCPURCHASING to request the contract be processed.

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Reports Find Supplier Lease Contracts with Assets FIN1030 Find Available Supplier Contract Installments FIN1080 Lease Assets to Review for Disposal FIN0910 Find Available Expense Recognition Schedules FIN1081 Find Supplier Contracts FIN0549 Find Supplier Contract Amendments FIN0891 Find Supplier Contract Lines FIN0636 Find Supplier Invoice FIN0342 Business Unit Setup FIN0580 Asset Inventory Depreciation Summary FIN0387

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Lessor/Customer Contracts

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Lessor/Customer Contract Process

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Customer Contract Contracts that meet the reporting criteria for GASB 87 will be entered in Workday with the contract type of Long Term Lease. These contracts will be created using a contract template.

Six contract lines are populated in a Long Term Lease contract when the Long Term Lease template is used to create the contract. Each line has a sales item with a predetermined Revenue Category and Line Type.

The Contract Entry tab of the Customer Lease Amortization Schedule Calculator maps outs all of the details needed to enter the contract in the manner necessary to create the correct accounting for financial reporting.

Validations Critical 

"Long Term" Revenue Category may only be used with Long Term Lease Deferred Revenue contract.



Attachment is required for Lease Contract. See Training Binder for list of required documents.



Company may not be used for Long Term Lease contract.



Intercompany is not allowed for Long Term Lease



Lease Contract must have at least one line with Revenue Treatment of Deferred.



Leasehold Tax Code should not be associated with Principal Installment, Interest Installment or Deposits.



Long Term Lease only one line allowed for Deposit, Prepayment, or Prepayment Amortization



Number of Installment Lines must match number of Principal Installment and Interest Installment Lines

Warnings 

Contract Type of Long Term Lease is used and Term is less than 12 months.

Evaluate for GASB.



Long Term Lease contracts should be created for contracts where the total contract amount exceeds $50,000. This total includes all terms, even those where the rate is yet to be determined. Please refer to the training binder for guidance.

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HOW TO: Create Long Term Lease Customer Contract Create Contract 1. Enter Create Customer Contract in Search box and select the task.

Contract Information 2. Enter Company 3. Enter Customer 4. Select Contract Type from the drop-down menu a. Select Long Term Lease 5. Select Copy from Contract Template a. Select Long Term Lease 6. Click OK

Contract Information 7. Enter the Effective Date

Contract Detail 8. Enter the Contract Name 9. Enter the Contract Description (optional) 10.Enter the Related Customer Contract (if applicable)

Contract Amounts and Balances 11.Enter Contract Amount a. Use value from Calculator

Additional Information 12.Enter Salesperson, if applicable 13.Enter Worktags

Goods and Services Line Details

Refer to the Customer Lease Amortization Schedule Calculator for values and dates.

14.Installment a. Enter Quantity b. Enter Unit of Measure c. Enter Unit Price 15.Principal Installment a. Enter Quantity b. Enter Unit of Measure c. Enter Unit Price 16.Interest Installment a. Enter Quantity b. Enter Unit of Measure c. Unit Price: $0 17.Prepayment, if applicable.

If contract does not require prepayment, delete line. If prepayment is required: a. Enter Quantity Lease Accounting – Supplier Contracts

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b. Enter Unit of Measure c. Enter Unit Price 18.Prepayment Amortization, if applicable

If contract does not require prepayment, delete line. If prepayment is required: a. Enter Quantity b. Enter Unit of Measure c. Enter Unit Price 19.Deposit, if applicable

If contract does not require a deposit, delete line. If deposit is required: a. Enter Quantity b. Enter Unit of Measure c. Enter Unit Price 20.NonLease Items, if applicable Skip Step if contract does not have nonlease items. If nonlease items are included in contract: a. Add Line to contract b. Enter Revenue Category i. Other Charges - Non-Lease Components Insurance [36290030] ii. Contact PCACCOUNTING if unsure what category to use c. Enter Quantity d. Enter Unit of Measure e. Enter Unit Price Revenue and Billing

Refer to the Customer Lease Amortization Schedule Calculator for values and dates.

21.Installment a. Check Zero Revenue box b. Enter From Date c. Enter To Date 22.Principal Installment a. Enter Revenue Override Amount i. Use value from Calculator b. Enter From Date c. Enter To Date 23.Interest Installment a. Enter Revenue Override Amount i. Use value from Calculator b. Enter From Date c. Enter To Date 24.Prepayment, if applicable a. Check Zero Revenue Box b. Enter From Date c. Enter To Date 25.Prepayment Amortization, if applicable Lease Accounting – Supplier Contracts

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a. Enter From Date b. Enter To Date 26.Deposit, if applicable a. Enter From Date b. Enter To Date 27.NonLease Items, if applicable a. Enter From Date b. Enter To Date Additional Information

28.Enter Worktags for each line 29.Enter Tax Code (Installment Line only), if applicable 30.Enter Tax Applicability if Leasehold Tax applies a. Taxable 31.Save for Later

Add Attachments 32.From Related Actions select Manage Attachments 33.Attach Documentation a. Customer Contract (required) b. Contract Summary Form (required) c. Negotiator’s Checklist (required) d. Customer Lease Amortization Schedule Calculator (required) e. Additional supporting documentation Submit Contract 34.From Related Actions select Edit 35.Click Submit

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Billing Schedules A Billing Schedule defines the schedule to bill over the term of the contract. Schedules are created by the contracting department and will most commonly be manually entered. They may also be loaded by Central Finance via an EIB, if there are more than 24 invoice installments.

There are two different Billing Methods you’ll see on Billing Schedules associated with GASB related lease contracts: Custom or Spread Even. A Schedule with the Billing Method of Spread Even distributes the payments evenly over the life of the contract.

Schedules with the Custom Billing Method allows you to create a schedule with custom installment amounts and/or dates.

If there are more than 24 invoice installments and you wish to have the schedule loaded via an EIB, email WorkdayFinancials to request an EIB spreadsheet. The contracting department will be responsible for adding schedule information to the spreadsheet before returning it to WorkdayFinancials to be uploaded.

Validations Critical: 

From Date and To Date on Billing Schedule Installment Lines need to fall with the From and To Date on the Schedule Header for Long Term Lease.



Schedule may not be dated prior to January 1, 2023 when related to a Long Term Lease contract.

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Schedule On Hold - Not allowed for Long Term Lease.

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Schedule Type Long Term Lease Schedule Type must be used with Long Term Lease Contract.

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From and To Date for Billing Schedule Installment Lines are required for Long Term Lease.

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HOW TO: Create Billing Schedules Create Spread Even Schedule 1. Open Customer Contract 2. From Related Actions select Create Billing Schedule 3. Click OK 4. Select Schedule Type a. Long Term Lease 5. Enter Schedule Description (optional) 6. Enter Payment Terms a. Due Upon Receipt 7. Select Invoice Type 8. Uncheck the Auto-Submit Invoice for Approval (recommended) 9. Select Billing Method a. Spread Even 10.Enter Billing Frequency 11.Enter From Date 12.Check the Radio Button for To Date 13.Enter To Date 14.Select appropriate Invoice Date Option 15.Select Line 16.Click Save and Continue 17.Click Generate Installments 18.Verify Dates and Values match the values on the Customer Lease Amortization Schedule Calculator 19.Click OK 20.Click Submit 21.Click OK 22.Verify Schedule Status is Approved Create Custom Schedule 1. Open Customer Contract 2. From Related Actions select Create Billing Schedule 3. Click OK 4. Select Schedule Type a. Long Term Lease 5. Enter Schedule Description (optional) 6. Select Invoice Type 7. Uncheck the Auto-Submit Invoice for Approval (recommended) 8. Select Billing Method a. Custom 9. Enter Billing Frequency 10.Enter From Date 11.Check the Radio Button for To Date 12.Enter To Date Lease Accounting – Supplier Contracts

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OR 13.Enter Number of Installments 14.Select appropriate Invoice Date Option 15.Select Line 16.Click on Save and Continue 17.Click Customize Installments a. Add a line for each Installment. b. For Each Line: i. Enter Invoice Date ii. Enter From Date iii. Enter To Date iv. Add a Line 1. Select a Line 2. Enter From Date 3. Enter To Date 4. Enter Amount 18.Click Save as Custom Schedule 19.Click Submit 20.Click OK 21.Verify Schedule Status is Approved

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TIP: Don’t want to manually enter all fields on a Custom Schedule?

Create a Spread Even Schedule, Generate Installments and then Customize Installments.

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Customer Invoices Customer Invoices, in most cases, will be created from a Billing Schedule. Each lease customer contract will have a minimum of one billing schedule for Installments. If there is a Prepayment, Deposit or NonLease Component you may have additional Billing Schedules.

The Installment Billing Schedule is entered based on the rates determined in the contract. The schedule can be created manually by the contracting department, or, if the number of installments exceeds 24, it can be uploaded by Central Finance.

The Invoice Date must be in the same month as the billing period. For example, if you are billing for 5/1 through 5/31, the Invoice Date should be 5/1. Payments that come in before the invoice date cannot be applied to the invoice. Payments received prior to the Invoice Date will be placed On Account for the appropriate department. Each department will be responsible for applying the payment on or after the Invoice Date.

Validations Critical 

Revenue Category may only be used on invoice related to Long Term Lease Contract.

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Due Date must match Invoice Date for Long Term Lease Contracts. Enter Due Date Override if needed.

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Invoice Date must be between From and To Dates for Long Term Lease Contract

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HOW TO: Create a Customer Invoice from a Billing Schedule 1. Open Customer Contract 2. Navigate to Schedules Tab 3. Open Billing Schedule 4. Locate the Installment for the current period 5. Related Actions > Billing Installment > Create Customer Invoice 6. Click OK 7. Click Refresh 8. Click on Customer Invoice a. Customer Invoice > Related Actions > Edit The Invoice Date i. Verify Due Date matches Invoice Date must be in the 1. If dates do not match, enter Due same period as Date Override to match Invoice Date the From and To ii. Update header, optional Date of the Billing iii. Add attachment, optional Period. iv. DO NOT modify the invoice lines v. Click Submit 9. Verify Status is Approved

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Revenue Recognition Schedules A Revenue Recognition Schedule indicates the posting period in which revenue should be recognized, and the amount to be recognized in each period.

Each lease customer contract will have a minimum of two Revenue Recognition Schedules: Principal Installment and Interest Installment. If the contract requires a Prepayment, a Prepayment Amortization Revenue Recognition Schedule will also be created.

The Revenue Recognition Schedules are calculated based on the Annual Interest Rate associated with the contract. The schedule can be created manually by the contracting department, or, if the number of installments exceeds 24, it can be uploaded by FPMIT. This task can be completed by the PC Department Accounting Manager.

Validations Critical 

From and To Dates on Revenue Recognition Installment lines are required for Long Term Lease

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From Date and To Date on Revenue Schedule Installment Line need to fall with the From and To Date on the Schedule Header for Long Term Lease

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From Date at Revenue Recognition Header is required for Long Term Lease contracts.

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Schedule On Hold is not allowed for Long Term Lease Contracts

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Schedule Type Long Term Lease must be used on Revenue Recognition schedule related to Long Term Lease Contract

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Schedule Type may only be used for Revenue Recognition Schedule related to Long Term Lease.

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HOW TO: Create Revenue Recognition Schedules 1. Open the Customer Contract 2. From Related Actions select Create Revenue Recognition Billing Schedule 3. Click OK Create Custom Schedule Revenue Recognition Information 4. Enter Schedule Type a. Long Term Lease 5. Schedule Description (Optional) 6. Select Revenue Recognition Method a. Custom 7. Enter From Date 8. Check Radio Button for To Date 9. Enter To Date 10.Select Line 11.Click OK 12.Click Customize Installments a. Add a line for each Installment. b. For Each Line: i. Enter Installment Date ii. Enter From Date iii. Enter To Date iv. Add a Line 1. Enter From Date 2. Enter To Date 3. Enter Amount 13.Click Save as Custom Schedule a. Verify Dates, Line and Amounts b. Compare values to Calculator 14.Click Submit 15.Click OK 16.Verify Schedule Status is Approved To save time when creating a Custom Schedule, you can create a Spread Even Schedule with Installments and then customize those installments. It will save you the trouble of adding lines and entering dates for each line.

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HOW TO: Create Revenue Recognition Accounting This task can be completed by the PC Department Accounting Manager. It cannot be completed by a delegate.

1. Open Customer Contract 2. Move to Schedules Tab 3. Open Revenue Recognition Schedule 4. Locate the Installment for the current period 5. Related Actions > Revenue Recognition Installment > Create Revenue Recognition Accounting 6. Check the box on the Installment Line 7. Click OK Installment schedules are not 8. Click OK available when an amendment 9. Click Refresh is in process.

10.Verify the Status is Complete

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Lease Amendments The Customer Lease Amortization Schedule Calculator (Calculator) that was created for the original contract should be updated with a new Tab for an amendment when the Contract Amount or To Dates change.

If the amendment is for NonLease Components, the additional tab on the Calculator is not required. Documentation to support the NonLease Component increase should be attached to the amendment. An amendment for NonLease Components simply involves adding a new line, or updating the value and date on an existing line, like you would with any standard Customer Contract.

Changes in the Contract Amount or To or From Dates will require modification to Revenue Recognition Schedule and Billing Schedule(s). Changes can be entered manually by the contracting department. If there are more than 24 installments to update or enter, changes may be uploaded by Central Finance.

Validations Critical 

Leasehold Tax should not be used on Interest Installment, Prepayment Amortization or Principal Installment Lines.



Long Term Revenue Category can only be used with Long Term Lease Contract.

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Amendment Scenarios Amendment, GASB 87 requirements still met*. 





Create a new Customer Lease Amortization Schedule Calculator o Enter Start Date of rate change or extension o Enter End Date of rate change or extension o Enter Payment Timing o Enter Payment Frequency o Enter Annual Interest Rate Create Amendment o Amendment Type: Amendment o Update Installment, Principal Installment and Interest Installment Lines based on values in updated calculator Update Billing and Revenue Schedules

Amendment, GASB 87 requirements no longer apply.   

Amendment Type: Amendment Add New Line for Base Rent (Lines for interest are not required) o Spend Category: Space and Facilities Leases (Long-Term) - Non GASB 87 [36250070]

Schedule for new line(s) are NOT required.

End of Term, Contract Complete 

Contract complete. Close Contract. o Amendment Type: Complete

Prior to End of Term, Contract Complete  

Amendment Type: Terminated Schedule statuses will update to Complete

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HOW TO: Create Amendment for Long Term Lease Customer Contract Process Steps: 1.

2.

3.

4.

5.

6.

7.

8.

9.

Prepare new tab on Customer Lease Amortization Schedule Calculator with amendment data a. Open Calculator attached to original contract b. Enter data on Amendment Tab c. Save and add as an Attachment Open Customer Contract From Related Actions select Amend Customer Contract Amendment Information a. Choose Amendment Type b. Enter Amendment Effective Date c. Enter Amendment Number d. Amendment Signed Date: Leave Blank unless fully executed e. Enter Amendment Description f. Choose New Contract Status, if applicable Update Line Details a. Installment Line i. Update Line Value a. Use value from Calculator b. NonLease Component i. Update Line Value Update Revenue and Billing a. Interest Installment i. Revenue Override Amount 1. Use value from Calculator ii. Update To Dates, if adding term b. Principal Installment i. Revenue Override Amount 1. Use value from Calculator ii. Update To Dates, if adding term Update Contract Amount a. Use value from Calculator Click Submit Add Attachments a. From Related Actions select Manage Attachments i. Add Calculator with Amendment Tab completed ii. Contract Summary Sheet iii. Amendment iv. Any other supporting documentation

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Close a Customer Contract An Amendment must be processed to move the status of a contract from Approved to Canceled, Complete or Terminated. If the contract is ending before the term is up, you can easily find the Installment Amounts completed on the Schedules tab.

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HOW TO: Cancel Long Term Lease Customer Contract 1.

2.

3.

4.

5.

6.

7.

8.

Open Customer Contract From Related Actions select Amend Customer Contract Enter Amendment Type Enter Amendment Effective Date Enter Amendment Number Enter Amendment Description Update New Contract Status Enter Line Details a. Each line must match the total amount billed or Installment Amount Completed 9. Update Revenue and Billing Lines a. Interest Installment i. Value must match Installment Amount Completed b. Principal Installment i. Value must match Installment Amount Completed c. Prepayment Amortization i. Value must match Installment Amount Completed 10. Update Additional Information a. Update Line Status i. Installment 1. Do not change line status ii. All other Lines 1. If Activity has occurred for the line, enter status of Complete or Terminated 2. If no activity has activity, you may use Complete, Terminate or Canceled 11. Update Contract Amount 12. Click Submit 13. Add Attachments, if needed

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Reports Find Billing Installments Find Revenue Recognition Installments

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Resources General Workday Questions IT Service Desk .......................................................... x7286 Contract Questions Procurement and Contract Services: General Line .............................................................. x7456 Email ........................ PCPURCHASING@piercecountywa.gov Invoice Questions PC Accounts Payable: Email ......................... PCAcctsPayable@piercecountywa.gov GASB 87 and Asset Questions PC Accounting Email ........................ PCACCOUNTING@piercecountywa.gov Lease Resources Website https://my.co.pierce.wa.us/3632/Lease-Resources

Pierce County Purchasing Guidelines https://my.co.pierce.wa.us/index.aspx?nid=271

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