Lessor/Customer Contract Process

1. Lease Negotiation

•Completed by: Department

•Form: Negotiator's Checklist (Required)

•Form: Customer Lease Amortization Schedule Calculator (Required)

•Form: Interest Rate Calculator (Required for Implicit Rate only)

•Prepare Contract

2. Prepare for Review/Submittal

•Completed by: Department

•Form: Create Contract Summary (Required)

•Enter and submit in Workday

3. Contract Review

•Completed by: Business Process reviewers/approvers

4. Schedules Created

•Completed/Initiated by: Department

•Revenue Recognition Schedules

•Billing Schedules

5. Collect Signatures

•Completed by: Procurement and Contract Services

•Collected via DocuSign

6. Monthly

•Completed by: Department

•Submit Customer Invoice

•Create Revenue Recognition Accounting

7. Period Close

•Completed by: Department

•Review and submit Contract Cancelations, as applicable

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

• Revenue Template required for Interest Installment Line

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.

HOW TO: Create Long Term Lease Customer Contract

Create Contract

1. Enter Create Customer Contract in Search box and select the task.

2. Enter Company

3. Enter Customer

4. Select Contract Type from the drop-down menu

12.Enter Salesperson, if applicable

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 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 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. Verify Revenue Template = Long Term Lease Spread Even by Month Installment Interest c. Enter From Date d. 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 a. Verify Revenue Template = Long Term Lease Spread Even by Month Prepayment Amortization b. Enter From Date c. Enter To Date 26.Deposit, if applicable a. Enter From Date b. a. Enter From Date b. a. 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

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.

• Schedule On Hold - Not allowed for Long Term Lease.

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

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

HOW TO: Create Billing Schedules

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

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.

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

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

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 i. Verify Due Date matches Invoice Date

1. If dates do not match, enter Due Date Override to match Invoice Date ii. Update header, optional iii. Add attachment, optional iv. DO NOT modify the invoice lines v. Click Submit

9. Verify Status is Approved

The Invoice Date must be in the same period as the From and To Date of the Billing Period.

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 Interest Installment Schedule and the Prepayment Amortization Schedules are created upon contract submittal. A Revenue Recognition Schedule template is assigned to each of these lines. The template is set up to recognize the revenue evenly over the life of the contract

The Principal Installment Schedule is 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

• 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

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

• Schedule On Hold is not allowed for Long Term Lease Contracts

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

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

HOW TO: Create Revenue Recognition Schedules

1.

1. Enter From Date

2. Enter To Date

3. Enter Amount

24.Click Save as Custom Schedule a. Verify Dates, Line and Amounts b. Compare values to Calculator

25.Click Submit

26.Click OK

27.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.

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

8. Click OK

9. Click Refresh

Installment schedules are not available

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.

HOW TO: Create Amendment for Long Term Lease Customer Contract

Process Steps:

1. 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

2. Open Customer Contract

3. From Related Actions select Amend Customer Contract

4. 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

5. Update Line Details a. Installment Line i. Update Line Value a. Use value from Calculator b. NonLease Component i. Update Line Value

6. 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 a. From Related Actions select Manage Attachments i. Add Calculator with Amendment Tab completed