Transition scenarios of IFRS 16/PSAK 73 in SAP RE-FX (Real Estate Flexible)
Understanding transition scenarios
Transition Scenarios
Figure 136: Scenario
Figure 137: Cash Flow and Transition
The Leasing Solution from the functional point of supports the described below transition scenarios. Please consider that the listed scenarios are available only with the option “Integration to Asset Accounting”.
In general, both retrospective approach (full or modified) and a start on the effective day can be used. If you decide to use a retrospective approach, a owner financing posting may be required. This posting will be created and posted at the start of posting.
Please note, that at the start of valuation (or the start of posting the valuation) the object cash flow of a contract ends. In this case, depending on the completion period of the conditions, follow-up postings, correcting the partner cash flow and the object cash flow, may be required. To do so, it is recommended to execute the previous partner and object transfer postings for the completion periods of the opening periods with transaction RERAPP. You can use the following variants:
This function is available for periodic conditions only. If you use one-time conditions, you must adjust these conditions manually.
Owner financing postings (when using the retrospective approach) and corrections of accruals and deferrals are automatically created as well. For the postings of accruals and deferrals the accrual engine is used.
Figure 138: Transition Scenarios Overview
Please note that the description of the scenarios is created from the functional point of view and does not provide any recommendations in relation to legal (customer-specific) processing. These must be agreed upon with the relevant auditors.
The following scenarios are available:
In this scenario, you have to transfer finance leases that existed prior to the new leasing regulations. In this case you have to link assets and asset values (APC, cumulative depreciation, and the net book value) to a contract in SAP RE. Please proceed as follows:
transfer the previous assets to a new RoU asset using the asset transfer functionality. Consider, that the newly created RoU assets have the correct depreciation key (as described in SAP Note 2297363).
In the contract, please don’t use the "First Posting" date. Furthermore, set the relevant date of application as the start of valuation.
Maintain the new "Net Worth Value Specified (Legacy Data)" condition (as described in SAP Note 2536673) with the net book value of the transferred asset.
Ensure that the "Net Worth Value Specified (Legacy Data)" condition and the initial start of consideration in the valuation rule have the same date.
With the opening entry, the cash flow item for the acquisition of the RoU asset is automatically set to "Posted" without generating posting documents in SAP Finance (but with creation of a RE document). The old leasing liability must be written off manually (e.g. against the asset clearing account).
Scenario 2: Retrospective approach with the transfer of external values (no calculation of RoU in RE-FX)
Using scenario 2, s scenario, the asset values, relevant on the date of application, are determined outside of SAP RE. Starting with the date of application, you need to transfer the calculated values to the contract in SAP RE and the related to the contract RoU . To do so, you can use the same steps as described in scenario 1, excluding the use of the asset transfer functionality to post the assets.
Scenario 3: Retrospective approach fully in RE-FX
Here you maintain all contracts, including their historical changes, in SAP RE. Consider, that for the initial valuation, only one time slice of the valuation rule can be maintained and therefore the historical contract changes are considered linearized in the calculation over the entire term before the date of application.
Maintain the contract, including all changes (such as condition time slots). Then create the necessary valuation rules. The start of valuation in this case is the contract start date, whereas the first posting date for the valuation is the date of application.
When you release the valuation rule, the RoU asset is generated. The following cash flow items are generated for the valuation rule:
Scenario 4: Start on the date of application with an "actual" RoU specification
You start on the date of application and you specify the RoU amount without calculating the RoU amount in SAP RE). To do so, you maintain the contract on the date of application and generate the relevant valuation rules (without using the "First Posting" functionality). Set the relevant date of application as the start of valuation and maintain a condition “Net Worth Val. Spec.“. When you release the valuation rule, the RoU asset is generated. The required cash flows will be generated.
Consider, in this case, the RoU asset does not have any historical APC or cumulative depreciation prior to the date of application.
Scenario 5: Implementation of RE-FX following first application of IFRS 16/US-GAAP 842
In this case, RoU assets and leasing liabilities were created and posted outside of SAP RE. Starting with the date of application you want to retroactively use contracts in SAP RE. Proceed as described for scenario 1 and consider, that you must create a new asset with the correct depreciation key. The old leasing liability must be written off manually (e.g. against asset clearing account). The integration between the SAP RE contract and the RoU asset is established in this case and future posting changes are integrated.
Scenario 6: Pro forma restatement
For scenario, calculations and valuations are performed in accordance with IFRS 16 and/or US-GAAP 842. This is done in parallel to the existing standard. This calculation is for information purposes only. The related functionality is described in SAP Notes 2530364 and 2536673. In this case you implement an additional valuation rule with the "Informational" indicator in Customizing. This valuation rule does not influence the current contract or other valuation rules, but you can use the normal valuation posting transaction RECEEP to set the cash flow records from this informational valuation rule to "Posted".
Explain transition scenarios and their influence to the valuation process
Transition: Date of First Posting
Figure 139: Transition: Date of First Posting
One possible transition scenario is to manually set the date of the first posting of the valuation.
In this case an automatic posting will be created for the period prior to the start of consideration.
Transition: Date of Consideration
Figure 140: Transition: Date of Consideration
Another option is to set the start of consideration manually to a desired date.
All relevant valuation cash flows will be generated using the start of consideration as seen in the screenshot above.
Transition: Asset Default Value (I)
Figure 141: Transition: Asset Default Value (I)
The SAP Real Estate Management leasing functionality allows to set the asset default value manually for a specific date.
Assigning a condition defined as Asset Default Value will lead to an acquisition of the same amount.
Transition: Asset Default Value (II)
Figure 142: Transition: Asset Default Value (II)
The absolute difference between calculated Right-of-Use and Asset Default Value is handled as special flow and will be posted as Liability Difference (positive or negative).
Example:
If the Asset Default Value is set to €400,00 but the system calculates a Present Value of the Liability of €278,32, the delta of € 121,68 will lead to a Positive Equity Change.
Transition Scenarios
Figure 137: Cash Flow and Transition
Please note, that at the start of valuation (or the start of posting the valuation) the object cash flow of a contract ends. In this case, depending on the completion period of the conditions, follow-up postings, correcting the partner cash flow and the object cash flow, may be required. To do so, it is recommended to execute the previous partner and object transfer postings for the completion periods of the opening periods with transaction RERAPP. You can use the following variants:
- initial valuation posting before periodic partner and object transfer postings
- first post only the partner-related postings, followed by the valuation posting and the object transfer postings.
This function is available for periodic conditions only. If you use one-time conditions, you must adjust these conditions manually.
Owner financing postings (when using the retrospective approach) and corrections of accruals and deferrals are automatically created as well. For the postings of accruals and deferrals the accrual engine is used.
Please note that the description of the scenarios is created from the functional point of view and does not provide any recommendations in relation to legal (customer-specific) processing. These must be agreed upon with the relevant auditors.
The following scenarios are available:
- Transferring finance leases that existed prior the date of application
- Retrospective approach with the transfer of external values
- Retrospective approach fully in SAP RE
- Start on the date of application with an “actual” RoU specification
- Implementation of SAP RE following first application of IFRS 16/US-GAAP 842
- Pro forma restatement.
In this scenario, you have to transfer finance leases that existed prior to the new leasing regulations. In this case you have to link assets and asset values (APC, cumulative depreciation, and the net book value) to a contract in SAP RE. Please proceed as follows:
transfer the previous assets to a new RoU asset using the asset transfer functionality. Consider, that the newly created RoU assets have the correct depreciation key (as described in SAP Note 2297363).
In the contract, please don’t use the "First Posting" date. Furthermore, set the relevant date of application as the start of valuation.
Maintain the new "Net Worth Value Specified (Legacy Data)" condition (as described in SAP Note 2536673) with the net book value of the transferred asset.
Ensure that the "Net Worth Value Specified (Legacy Data)" condition and the initial start of consideration in the valuation rule have the same date.
With the opening entry, the cash flow item for the acquisition of the RoU asset is automatically set to "Posted" without generating posting documents in SAP Finance (but with creation of a RE document). The old leasing liability must be written off manually (e.g. against the asset clearing account).
Scenario 2: Retrospective approach with the transfer of external values (no calculation of RoU in RE-FX)
Using scenario 2, s scenario, the asset values, relevant on the date of application, are determined outside of SAP RE. Starting with the date of application, you need to transfer the calculated values to the contract in SAP RE and the related to the contract RoU . To do so, you can use the same steps as described in scenario 1, excluding the use of the asset transfer functionality to post the assets.
Scenario 3: Retrospective approach fully in RE-FX
Here you maintain all contracts, including their historical changes, in SAP RE. Consider, that for the initial valuation, only one time slice of the valuation rule can be maintained and therefore the historical contract changes are considered linearized in the calculation over the entire term before the date of application.
Maintain the contract, including all changes (such as condition time slots). Then create the necessary valuation rules. The start of valuation in this case is the contract start date, whereas the first posting date for the valuation is the date of application.
When you release the valuation rule, the RoU asset is generated. The following cash flow items are generated for the valuation rule:
- informational cash flow with the flows prior to the date of application (using linearized calculation)
- cash flow as of the date of application with planned items (opening entries are included).
Scenario 4: Start on the date of application with an "actual" RoU specification
You start on the date of application and you specify the RoU amount without calculating the RoU amount in SAP RE). To do so, you maintain the contract on the date of application and generate the relevant valuation rules (without using the "First Posting" functionality). Set the relevant date of application as the start of valuation and maintain a condition “Net Worth Val. Spec.“. When you release the valuation rule, the RoU asset is generated. The required cash flows will be generated.
Consider, in this case, the RoU asset does not have any historical APC or cumulative depreciation prior to the date of application.
Scenario 5: Implementation of RE-FX following first application of IFRS 16/US-GAAP 842
In this case, RoU assets and leasing liabilities were created and posted outside of SAP RE. Starting with the date of application you want to retroactively use contracts in SAP RE. Proceed as described for scenario 1 and consider, that you must create a new asset with the correct depreciation key. The old leasing liability must be written off manually (e.g. against asset clearing account). The integration between the SAP RE contract and the RoU asset is established in this case and future posting changes are integrated.
Scenario 6: Pro forma restatement
For scenario, calculations and valuations are performed in accordance with IFRS 16 and/or US-GAAP 842. This is done in parallel to the existing standard. This calculation is for information purposes only. The related functionality is described in SAP Notes 2530364 and 2536673. In this case you implement an additional valuation rule with the "Informational" indicator in Customizing. This valuation rule does not influence the current contract or other valuation rules, but you can use the normal valuation posting transaction RECEEP to set the cash flow records from this informational valuation rule to "Posted".
In this case an automatic posting will be created for the period prior to the start of consideration.
Another option is to set the start of consideration manually to a desired date.
All relevant valuation cash flows will be generated using the start of consideration as seen in the screenshot above.
Transition: Asset Default Value (I)
The SAP Real Estate Management leasing functionality allows to set the asset default value manually for a specific date.
Assigning a condition defined as Asset Default Value will lead to an acquisition of the same amount.
Example:
If the Asset Default Value is set to €400,00 but the system calculates a Present Value of the Liability of €278,32, the delta of € 121,68 will lead to a Positive Equity Change.
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