Managing Fund Accounting for SAP Contract and Lease Management

Accounting Principles and Fund Accounting for GASB content delivery includes accounting principles and valuation rules to comply with US Governmental Accounting Standards Board (GASB) full accrual and modified accrual accounting for lease in accounting.

• Valuation rule US_UGSF_FL (US GASB Full Accrual) provides rules consistent with GASB 87. It can be used to recognize a lease-in liability and a lease asset at the commencement of the lease term. Subsequently, when payments are made, it is used to reduce the lease liability and recognize an outflow of resources (for example, expense) for interest on the liability. Valuation rule US_GAAP_FL (US GAAP) is available in the delivery and will include accrual accounting principles.
• Valuation rule US_UGSM_FL (US GASB Modified Accrual) provides rules for expenditure recognition when a lease is expected to be paid from general government resources. It allows the lease to be accounted for and reported on a basis that is consistent with governmental fund accounting principles. An expenditure and other financing source is recognized in the period the lease is initially recognized. In order to recognize the lease asset expenditure, asset depreciation should be performed.

In a valuated lease, there is no difference between the fund and grant derived from the cost object and organizational assignment.

Content delivery includes accounting principles and valuation rules for full accrual and modified accrual accounting for lease out accounting.

Lease out valuation rules such as US_UGSF_SL (GASB Full Accrual) and US_UGSM_SL (GASB Modified Accrual) are available in the standard content delivery that would recognize a lease receivable and a deferred inflow of resources at the commencement of the lease term. Postings to recognize an inflow of resources (for example, revenue) from the deferred inflows of resources has to be done manually. US_GAAP_SL (US GAAP) is consistent with accrual accounting principles.

Standard content delivery also includes rules for transfer postings, intercompany postings, and operating lease postings.

In a nonvaluated SAP Contract and Lease Management contract, periodic posting (business partner invoice document) is posted with the P&L account from account determination against the business partner from the SAP Contract and Lease Management contract.

The P&L account line gets Public Sector Management account assignments from the organizational assignment on a non-valuated lease periodic posting. The business partner line item in a periodic posting document gets Public Sector Management document splitting and balancing account assignments via document splitting logic.

In a periodic posting for Type of posting run, only Integrated Posting is supported in the SAP S/4HANA Cloud, public sector.

In the figure, Valuated SAP Contract and Lease Management Contract and Subsequent Postings, note that there can be variations and differences based on the contract characteristics.

Public Sector Management account assignments that persist in the SAP Contract and Lease Management contract will be used in all subsequent financial postings, such as valuation, interest, and periodic postings.

As you complete the contract, when applicable, asset will be created using the account assignments from with the applicable cost object and Public Sector Management assignments from the organizational assignment.

In a periodic posting for Type of posting run, only Integrated Posting is supported in the SAP S/4HANA Cloud for public sector.

Parallel valuation is based on the ledger and accounting principles set up.

SAP Contract and Lease Management offer the following integrated leasing scenarios in public sector management:

• Posting and Reporting
• Contract Management
• Classification and Valuation

• Manage right-of-use assets and liabilities
• Post depreciation and repayments
• Lease payments/billings
• Invoices/Percentage Rent
• Customer/Vendor accounting
• Cost/Profit center/Fund accounting
• Funds and Grants Management

• Different lease types for lease in and lease out
• Leasing partners
• Subject of agreement like Property, Equipment, Cost Centers, WBS Elements, and so on
• Public Sector Management account assignments Fund, Grant, and Functional Area
• Lease payment cash flow with full integration
• Terms and conditions for notice and renewal options
• Critical dates and reminders
• Document management

• Classification and valuation rules
  • US GAAP
  • GASB Full Accrual Accounting
  • GASB Modified Accrual Accounting
• Calculate and report on net present value, depreciation, repayment, and interest rate
• Create/Link to fixed assets
• Lease Modification, Re-Assessments

The figure, Lease-in Accounting Example: Full Accrual Postings illustrates the valuation rule US_UGSF_FL with an example of postings for year 1.

Valuation rule US_UGSF_FL (US GASB Full Accrual) provides rules consistent with GASB 87. It can be used to recognize a lease-in liability and a lease asset at the commencement of the lease term. Subsequently, when payments are made, it is used to reduce the lease liability and recognize an outflow of resources (for example, expense) for interest on the liability.

Depreciation key LEAX (Depreciation from Real Estate Leasing) would amortize the right of use (RoU) asset in a systematic and rational manner over the lease term.

The figure, Lease-in Accounting Example: Modified Accrual Postings illustrates the valuation rule US_UGSM_FL with an example of postings for year 1.

Modified accrual posting valuation provides rules for expenditure recognition so that lease-in is accounted for and reported on a basis that is consistent with governmental fund accounting principles. An expenditure and other financing source is recognized in the period the lease is initially recognized. In order to recognize the lease asset capital outlay, RoU asset must be depreciated at 100%.

Payment clearing would recognize the principal expenses for the whole amount that includes interest. However, when interest expenses is posted, it would offset the principal to bring to the actual principal amount.