Setup Considerations: Lease Accounting
You can use this topic to help make decisions when planning your configuration and use of lease accounting. It explains:
- Why to set it up.
- How it fits into the rest of Workday.
- Downstream impacts and cross-product interactions.
- Security requirements and business process configurations.
- Questions and limitations to consider before implementation.
Refer to detailed task instructions for full configuration details.
What It Is
Lease accounting in Workday automatically generates lease transactions from supplier contracts. You can then create financial reporting on your right-of-use (ROU) assets and lease liabilities. This reporting can help you comply with the current accounting standards under U.S. Generally Accepted Accounting Principles (GAAP), U.S. Governmental Accounting Standards Board (GASB), and International Financial Reporting Standards (IFRS).
Business Benefits
With Workday lease accounting, you can:
- Record and process full lifecycle accounting of a lease using only Workday, without other integrations and applications.
- Create lease-type supplier contracts for financial leases, operating leases, and short-term operating leases.
- Generate data needed for quantitative disclosure requirements.
- Generate comparative financial statements from before and after the U.S. GAAP, GASB, and IFRS changes to the accounting standards.
- Compare your operating lease-type supplier contracts under different accounting methods by creating alternate contracts.
- Import active, in-progress lease contracts into Workday without duplicating historical transactions.
Use Cases
You can create lease-type supplier contracts in Workday that enable you to record your lease contracts and transactions. You can represent any combination of these lease contracts:
- Financial leases.
- Operating leases for IFRS or U.S. GASB.
- Operating leases for comparative and retrospective reporting.
- Operating leases for U.S. GAAP.
Questions to Consider
Questions | Considerations |
|---|---|
What are your financial and statutory reporting requirements?
How do your debt or bank covenants require you to report lease accounting transactions? | The location and structure of your organization determines your financial reporting obligations. Each country expects companies to provide financial statements in accordance with statutory requirements. You might need to report for both accounting standards if you operate in both the U.S. and a country that follows IFRS.
Your debt or bank covenants might also require comparative or retrospective financial reporting that differs from the statutory requirements set by your local or national government. Before you configure lease accounting, confirm your financial reporting obligations. You might need to configure any combination of these lease-type supplier contracts:
|
What lease contracts types do you need to record in Workday? | If you plan to record financial leases or operating leases that use ROU Asset Depreciation Expense , you can expect additional effort to configuring asset accounting. Asset accounting requires these additional steps to set up the business asset accounting and business asset tracking functional areas.
You can also represent lease contracts in Workday under the former lease accounting standards. Consider configuring a contract type for operating leases that uses the Straight Line Expense accounting method. You can then use that contract type to create reporting that compares your lease contracts under different standards. |
Do you have active, ongoing lease contracts that you need to record in Workday? | If you have active, ongoing lease contracts, consider migrating them into Workday and updating the installment status. Workday enables you to generate accounting transactions for your lease contracts from any installment period. This functionality enables you to import ongoing lease contracts by representing partially fulfilled contracts.
Example: Your contract started in 2015 and finishes in 2025. When you update your paid installments with a status of Accounted , Workday recognizes those transactions as posted and doesn't generate additional transactions.Specify the installment status before you generate expense recognition accounting. Use the Mass Update Lease Contract Installment to Available or Accounting Status task to specify the status.If you reverse an installment with an Accounted status after you amend a contract, you might see a Manual Journal Required column on your expense recognition schedule. Workday displays this column when you need to provide an accounting journal that adjusts your ledgers for the reversed installment. |
How do you want Workday to record financial lease transactions? | You can create financial leases without configuring lease accounting. Workday automatically records the transactions of depreciable capital assets from financial leases to the common book code. You can change this behavior by configuring a book code for financial lease contracts on the Maintain Lease Contract Book Code Configuration task.
If you later decide you don't want to use the common book code, you can create a new book code configuration when you set up lease accounting. You can't change or remove a book code configuration after use. |
Recommendations
Functionality | Considerations |
|---|---|
Spend categories | Consider what equipment or facilities that you expect to lease. We recommend that you configure spend categories for each kind of lease you use. Example: Spend categories for vehicles, production machinery, office buildings, and laptops.
You can't change a spend category once it's in use. |
Alternate lease-type supplier contracts | Workday recommends that you use alternate lease-type supplier contracts when you might need to compare contracts under different accounting standards or interest rates. Alternate lease-type supplier contracts save you the effort of creating and maintaining multiple separate contracts to represent the same contract terms.
If you want to create an alternate lease-type supplier contract, you must:
|
Multibook asset accounting | Workday strongly recommends that you configure multibook asset accounting when you want to create financial leases or operating leases that use ROU Asset Depreciation Expense .
When you enable multibook asset accounting, you must also configure the Business Asset Multibook Settlement account posting rule.When you don't configure multibook asset accounting, Workday automatically books asset transactions to the common book code. |
Requirements
No impact.
Limitations
You can't select grant worktags on the
Goods Lines
section when you create a lease-type supplier contract. Workday doesn't support award cost processing functionality with lease-type supplier contracts.For leased assets generated from fully received lease-type supplier contracts, you can't issue them to workers.
When working with lease amendments, you can't:
- Create amendments for multicompany leases.
- Create amendments for short-term operating leases.
- Create an amendment from an alternate lease-type supplier contract.
- Create alternate lease-type supplier contracts after you amend the original contract. If you need to create alternate lease-type supplier contracts, do so before you create the amendment.
- Copy amended lease-type supplier contracts. If you need to copy your lease-type supplier contract, do so before you create the amendment.
You can only create these amendments to lease-type supplier contracts:
- Lease extensions.
- Non-CPI payment changes.
- Worktag change.
Workday only supports:
- Fully recoverable tax for lease accounting.
- Fiscal years with calendar months on expense recognition schedules.
Tenant Setup
Select
Lease Accounting
on the Lease Accounting
section of the Edit Tenant Setup - Financials
task to enable the feature.Enable multibook asset accounting on the
Edit Tenant Setup - Financials
task when you select Operating Lease IFRS or Public Sector
and at least 1 of these options:
- Modified or Full Retrospective Reporting
- Operating Lease US GAAP
Security
Configure these security domains in the Common Financial Management functional area:
Domains | Considerations |
|---|---|
Set Up: Accounts
| Set up account sets. |
Set Up: Accounting Rules
| Set up account posting rules. |
Set Up: Journal Source
| Configure operational transactions for lease accounting. |
Set Up: Spend Categories
| Set up spend categories for lease accounting. |
Configure these security domains in the Supplier Contract functional area:
Domains | Considerations |
|---|---|
Process: Supplier Contract - Expense Recognition
| Create expense recognition accounting and view expense recognition schedules.
You can use this domain to schedule automatic creation of expense recognition accounting for lease-type supplier contracts. |
Set Up: Supplier Contract Accounting
| Assign book codes to lease-type supplier contract configurations. |
Set Up: Supplier Contracts
| Configure lease supplier contract types and lease amendment types. |
If you want to create lease-type supplier contracts with depreciable capital assets, configure these security domains:
Domains | Considerations |
|---|---|
Process: Supplier Contract - Receipt in the Supplier Contracts functional area | Create receipts on supplier contracts. |
Set Up: Ledger and Book in the Common Financial Management functional area | Set up book codes for lease accounting. |
Set Up: Company Asset Books in the Business Asset Accounting functional area | Restrict transactions on company asset books. |
Set Up: Business Asset Accounting in the Business Asset Accounting functional area | Maintain asset books and view depreciation profiles and schedules. |
You can also set up the
Access Supplier Contract Type (Segmented)
domain on the Supplier Contracts functional area to help you control access to any supplier contract types. When you configure a worker to have access to a lease contract, they also have access to the alternate contract.Business Processes
Business Processes | Considerations |
|---|---|
(Optional) Alternate Supplier Contract Event
| Create alternate contracts for leases. |
(Optional) Asset Registration Event
| Register assets. Configure this business process if you want to create:
|
(Optional) Receipt Event
| Create and approve receipts for contract lines. |
(Optional) Supplier Contract Amendment Event
| Create amendments for lease-type supplier contracts. |
Supplier Contract Event
| Create and approve lease-type supplier contracts. |
Supplier Invoice Event
| Create and approve lease-type supplier invoices for supplier invoice installments. |
Supplier Contract Invoice Schedule Event
| Create supplier invoice schedules and installments for leases. |
Supplier Lease Contract Cancellation Event
| Cancel lease-type supplier contracts. |
Reporting
You can use these standard reports for quantitative disclosures for financial reporting:
Reports | Considerations |
|---|---|
Lease Accounting - Interest Expense for Leases
| The interest expense of lease-type supplier contracts in the installment period you specify. |
Lease Accounting - Operating Lease Cost
| The costs of operating lease-type supplier contracts in the installment period you specify. |
Lease Accounting - Scheduled Cash Payments
| Scheduled cash payments for amounts used to measure lease liabilities. Enables you to review payments that reduce your lease liability in the installment periods you specify. |
Lease Accounting - Supplemental Non-Cash
| The supplemental noncash details of lease liabilities that originate from ROU assets. |
Lease Accounting - Variable Lease Cost
| Variable lease costs on installment periods you specify that are linked to supplier invoices of lease-type supplier contracts. |
Lease Accounting - Weighted Average Discount Rate
| The weighted average discount rate of the remaining lease payments on lease-type supplier contracts as of a specified date. |
Lease Accounting - Weighted Average Lease Term
| The weighted average lease term of your lease-type supplier contracts as of a specified date. |
You can use these standard reports for reconciliation:
Reports | Considerations |
|---|---|
Finance Lease Accounting Balance Sheet Reconciliation
| The lease liability balances of finance lease-type supplier contracts as of a specific installment period. Also reconciles the remaining amounts to the resulting ledger account balances. |
Operating Lease Accounting Balance Sheet Reconciliation
| The lease liability and ROU asset balances of operating lease-type supplier contracts as of a specific installment period. Also reconciles the remaining amounts to the resulting ledger account balances. |
You can also use the
Assets Net Book Value
report to view the net value of individual assets in a company.Integrations
Web Services | Considerations |
|---|---|
Get Supplier Contracts
| Retrieves all the information associated with your supplier contract. Enables you to view detailed information across multiple lease-type supplier contracts. |
Put Lease Contract Book Code Configurations
| Creates lease contract book code configurations. Enables you to set up many contract types to book code configurations at once. |
Put Supplier Contract Type
| Creates supplier contract types. Enables you to set up many supplier contract types at once. |
Put Supplier Contract Type Security Segment
| Creates segmented security on supplier contract types. Enables you to grant access to multiple supplier contract types across many roles. |
Submit Receipt
| Creates asset receipts. Enables you to create receipts for multiple lease-type supplier contracts. |
Submit Supplier Contract
| Enables you to create many lease-type supplier contracts quickly. You can use the web service to help you record large numbers of lease contracts. |
Connections and Touchpoints
Functional Areas | Considerations |
|---|---|
(Optional) Business Asset Accounting
(Optional) Business Asset Tracking | Record and track the transactions of your leased assets. |
Procurement | Create and process the receipts of lease-type supplier contracts. |
Supplier Accounts | Generate supplier invoice installments on the supplier invoice schedule of a lease-type supplier contract. |
Supplier Contracts | Create a lease from a supplier contract that uses a lease contract type. |
Workday offers a Touchpoints Kit with resources to help you understand configuration relationships across your tenant. Learn more about the Workday Touchpoints Kit on Workday Community.