Re050 Ifrs16

SAP e-book Page 1 of 1
RE050
Leasing for IFRS and US GAAP with
SAP Real Estate Management
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PARTICIPANT HANDBOOK
INSTRUCTOR-LED TRAINING
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Course Version: 01
Course Duration: 3 Day(s)
e-book Duration: 4 Hours
Material Number: 50136550
https://sap.plateau.com/icontent_e/CUSTOM_eu/sap/self-managed/ebook/RE050_EN_Col... 11/9/2018
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© Copyright. All rights reserved. iv
Contents
vi Course Overview
1 Unit 1: IFRS 16 and US GAAP ASC 842: overview
2 Lesson: Understanding IFRS and US-GAAP regulations
15 Unit 2: SAP Lease Contract Management
16 Lesson: Understanding SAP Lease Contract Management

26 Lesson: Understanding contract conditions
31 Lesson: Describing Examples for Lease Contracts
38 Unit 3: Contract valuation and posting
39 Lesson: Explaining valuation data and contract conditions

53 Lesson: Understanding contract valuation
68 Lesson: Describing condition valuation properties
83 Unit 4: Change Management
84 Lesson: Performing contract condition changes

87 Lesson: Explaining contract renewals and terminations
95 Lesson: Understanding valuation behavior
101 Unit 5: Transition scenarios
102 Lesson: Understanding transition scenarios

104 Lesson: Explain transition scenarios and their influence to the
valuation process
109 Unit 6: System Setup
110 Lesson: Performing main customizing tasks

120 Lesson: Maintain settings for valuation process
125 Lesson: Maintaining settings for account determination
© Copyright. All rights reserved. v
Contents
vi Course Overview
1 Unit 1: IFRS 16 and US GAAP ASC 842: overview
2 Lesson: Understanding IFRS and US-GAAP regulations
15 Unit 2: SAP Lease Contract Management
16 Lesson: Understanding SAP Lease Contract Management

26 Lesson: Understanding contract conditions
31 Lesson: Describing Examples for Lease Contracts
38 Unit 3: Contract valuation and posting
39 Lesson: Explaining valuation data and contract conditions

53 Lesson: Understanding contract valuation
68 Lesson: Describing condition valuation properties
83 Unit 4: Change Management
84 Lesson: Performing contract condition changes

87 Lesson: Explaining contract renewals and terminations
95 Lesson: Understanding valuation behavior
101 Unit 5: Transition scenarios
102 Lesson: Understanding transition scenarios

104 Lesson: Explain transition scenarios and their influence to the
valuation process
109 Unit 6: System Setup
110 Lesson: Performing main customizing tasks

120 Lesson: Maintain settings for valuation process
125 Lesson: Maintaining settings for account determination
© Copyright. All rights reserved. v
Course Overview
TARGET AUDIENCE
This course is intended for the following audiences:
● Application Consultant
● Industry / Business Analyst Consultant
● Super / Key / Power User
● Business Process Owner/Team Lead/Power User
● Solution Architect
© Copyright. All rights reserved. vi
UNIT 1 IFRS 16 and US GAAP

ASC 842: overview
Lesson 1
Understanding IFRS and US-GAAP regulations 2
UNIT OBJECTIVES
● Describe new accounting standards in IFRS 16 and US GAAP ASC842

● Describe influence of new accounting standards for your company
● Understand new SAP Real Estate functions related to the new accounting standards
© Copyright. All rights reserved. 1
Unit 1
Lesson 1
Understanding IFRS and US-GAAP regulations
LESSON OBJECTIVES
After completing this lesson, you will be able to:
New Accounting Standards in IFRS and US GAAP
Figure 1: Scenario
Figure 2: Motivation to Replace IAS 17
Most operating leases are comprised of financial obligations similar to finance leases and
other financial commitments (such as loans). The flexibility to design leases as operating
leases or finance leases gave companies an option to hide their financial obligations on the
balance sheet. Therefore, boards had concerns about the lack of transparency of information
about lease obligations for investors and analysts. Listed companies using IFRS Standards or
Lesson: Understanding IFRS and US-GAAP regulations
US GAAP are estimated to have around US$ 3.3 trillion lease commitments. Over 85% of
these lease commitments do not appear on balance sheets today.
Figure 3: The IFRS16 Leases Standard Quick Overview
The new lease accounting standard IFRS16 Leases was published by the International
Accounting standards board (IASB) on January 13th, 2016. The effective date of the new
IFRS16 is January 1st, 2019. However, there is the possibility of a limited early application. The
changes in the lease accounting standards are focused on lessee accounting. Lessors will not
face any significant changes compared to IAS17.
There are some small differences between IFRS16 and US-GAAP ASC842. Every company
that has leased-in a building or other assets will be affected by the new standard IFRS16.
Nearly all accounting possibilities not shown on balance sheets are eliminated as lessees are
required to capitalize and recognize most leasing contracts directly on their balance sheet.
Figure 4: IFRS16 and US GAAP ASC842
Unit 1: IFRS 16 and US GAAP ASC 842: overview
The new accounting standards IFRS 16 and US GAAP ASC842 determine that lessees will no
longer distinguish between finance leases (recognized on the balance sheet) and operating
lease contracts (recognized off the balance sheet). With the new accounting standards,
companies are required to recognize a right-of-use asset and a lease liability for almost all
types of lease contracts with few exceptions. This is based on the principle that a lease
contract is the acquisition of a right to use an underlying asset in exchange of lease payments.
Until the new accounting standards, finance lease contracts were recognized on balance
sheets, whereas operating lease contracts were recognized off balance sheets. The effect of
this approach is a substantial increase in the amount of recognized financial liabilities and
assets for companies that have a significant amount of lease contracts currently classified as
operating leases.
Figure 5: IFRS: Finance Lease and Operating Lease
Figure 6: IFRS 16 - The New Accounting Standard for Leases
The new accounting standards do not substantially impact lessor accounting. However, when
compared to the old standards, there are some additional requirements regarding disclosure
reporting. IFRS16 will have a big impact on lessee accounting, as companies are required to
recognize almost all leasing contracts on their balance sheet. There is a single accounting
model for all leases, with a few exceptions.
Effects of The New Accounting Standards
Figure 7: Effect analysis by IASB
The new accounting standards will have a big impact on the balance sheet and the
performance metrics of lessees. An effect analysis conducted by the IASB provided the
following results. The sum of lease assets will increase significantly which leads to an increase
in the balance sheet total. This increase of lease assets is tied directly to the financial liabilities
which therefore also increase significantly. Furthermore, the ratio of equity to liabilities will
decrease due to the rise in financial liability. The leverage will increase due to the rise in lease
assets recognized on the balance sheet. This also leads to a decrease in asset turnover. EBIT/
Operating Profit (earnings before interest and taxes ) and EBITDA (earnings before interest,
taxes, depreciation and amortization) will increase with the application of IFRS16. EBITDAR
(Earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs)
will be mostly untouched.
Figure 8: Further Information Material
For additional information material, refer to the following:

● IASB:
- http://www.ifrs.org/Current-Projects/IASB-Projects/Leases/Pages/Leases.aspx
- http://en.wikipedia.org/wiki/International_Financial_Reporting_Standards
● FASB:
- http://www.fasb.org/jsp/FASB/Page/BridgePage&cid=1351027207574
- http://en.wikipedia.org/wiki/Financial_Accounting_Standards_Board
● HGB (Germany):
- http://de.wikipedia.org/wiki/Handelsgesetzbuch
● Other local standards
Figure 9: IFRS Leasing Example: Leased Building for 3 Years
To determine the value of the liability, the repayment for each period has to be calculated with
the specified interest rate (in this case 6%). The sum of repayments for all periods is the value
of the liability. In this example, the contract contains yearly payments in arrears and no
further obligations. Here, the values for right-of-use (RoU) and liability are the same. This
example uses the straight-line approach for the depreciation so for the yearly depreciation
value, the RoU is divided by the number of periods.
Figure 10: IFRS Leasing Example: Leased Building for 3 Years with Initial Costs
Compared to the previous example, the value of the RoU is increased directly by the value of
the initial costs (in this case 6.000€). An increased RoU value leads to an increase in
depreciation because of the higher value which needs to be depreciated by the end of the
contract term (3 years in this example). Initial costs do not impact the liability or the interests.
Hence, the liability and the interests are unchanged from the previous example where there
were no initial costs.
Figure 11: IFRS Leasing Example: Leased Building for 3 Years with Initial Costs and Service Costs
Compared to the previous example, the contract includes service costs in this case. Service
costs are not relevant for the calculation of RoU or liability. However, service costs need to be
linearized over the whole contract term. To linearize, sum up all service charges (in this
example 900€ + 1.000€ + 1.100€ = 3.000€). The sum of the service charges is then divided
by the number of periods (in this case 3 as we have a 3 year contract). The service costs are
linearized with the same value in each period (3.000€ : 3 Periods = 1.000€/Period).
New SAP Real Estate Functions
Figure 12: Overview on New SAP Real Estate Functions
The SAP Real Estate Management solution for lease accounting is a functional extension of
SAP Real Estate Management. It is based on contracts and includes the following functions:
● Contract objects for lease contracts
● Definition and assignment of valuation rules for contract conditions
● Mass maintenance transaction for creating and changing valuation rules
● Valuation run and valuation postings (including simulation and cancelation)
● Separate authorizations for the maintenance of normal and valuation-related contract
data
● Customizing settings for the definition of valuation rules (including account determination)
Figure 13: Implementation approaches
As the new functions for lease accounting represent a functional extension for SAP Real
Estate Management, there are different approaches for implementation projects. The
implementation approach depends from the functional scope to be implemented as well as
from the existing SAP system landscape. If your company already uses SAP Real Estate
Management, the new functions can be used additionally. After defining the customizing
settings for valuation rules and for valuation postings the valuation rules and other valuation-
relevant data for contracts can be maintained and the valuation process can be started.
Existing contracts will be complemented by additional registers for valuation-relevant data. If
your company does not already use SAP Real Estate Management, the valuation functions
can still be used. In this case, it is necessary to implement the contract management
functions and to define the settings for the accounting integration (using SAP FI, SAP FI-AA
and SAP CO). Optionally, further master data objects and functions of SAP Real Estate
Management can be implemented in later project steps.
Depending on the project approach, a sandbox system (based on the productive system and
enhanced with the necessary support packages) for the design and prototyping phases can
be used. Following this approach, the evaluation and the definition of system settings can be
performed based on real contract data.
Figure 14: Supported Accounting Approaches
From the perspective of Financial Accounting, the following approaches and functionalities
are available:
● SAP S/4HANA Finance
● New GL Ledger Approach
● New GL Account Approach
● Classic GL
On the other hand, there are different approaches within asset accounting, as follows:
● New asset accounting
● Classic asset accounting with new depreciation calculation
● Classic asset accounting with old depreciation calculation
Furthermore, it is possible to use direct posting functions without integration to the asset
accounting component. In the figure, Supported Accounting Approaches, the available
approaches to financial accounting and asset accounting are described.
Figure 15: Release Information and Important SAP Notes (I)
In the following SAP notes you find detailed information related to lease contracts and the
valuation process:
● 2255555 Release note: valuation of Leasing contracts
● 2254013 SAP Real Estate: release for SAP S/4 HANA
SAP note 2255555 also refers to other important SAP notes regarding lease contracts and
contract valuation
The first delivery is by the following support packages for each component:
● EA_APPL: 606 SP 17, 616 SP 10
● SAP_FIN: 618 SP 03, 720 SP05, 730 SP04
● EA-FIN: 617 SP12, 700 SP9; S4CORE 100 SP3
Follow-up enhancements and corrections will be made on basis of the first delivery support
package.
Figure 16: Release Information and Important SAP notes (II)
LESSON SUMMARY
You should now be able to:
Unit 1
Learning Assessment
1. Please give an overview on the main topics of the new accounting standards IFRS 16 and
US GAAP ASC 842.
2. Please describe the influence of the new accounting standards for your business.
3. Please describe the different implementation approaches for the new accounting
standards.
4. Which SAP component should be taken to search SAP notes regarding RE-FX Lease
Accounting?
Unit 1
Learning Assessment - Answers
1. Please give an overview on the main topics of the new accounting standards IFRS 16 and
US GAAP ASC 842.
There are some differences between IFRS16 and US-GAAP
-of-
This leads to a substantial
2. Please describe the influence of the new accounting standards for your business.
business.
Unit 1: Learning Assessment - Answers
3. Please describe the different implementation approaches for the new accounting
standards.
the new functions can be used
other valuation- contracts the valuation functionalities
FI-
functions of SAP Real Estate
definition
4. Which SAP component should be taken to search SAP notes regarding RE-FX Lease
Accounting?
SAP -FX- - SAP

- functions.
UNIT 2 SAP Lease Contract

Management
Lesson 1
Understanding SAP Lease Contract Management 16
Lesson 2
Understanding contract conditions 26
Lesson 3
Describing Examples for Lease Contracts 31
UNIT OBJECTIVES
● Understand solution design of Lease Contracts
● Describe Lease Contracts
● Describe contract conditions
● Understand posting parameters
● Describe different examples for lease contracts
Unit 2
Lesson 1
Understanding SAP Lease Contract
Management
LESSON OBJECTIVES
Contract Management Solution Design
Figure 17: Scenario
Figure 18: Lease Contract: Definition
Unit 2
Lesson 1
Understanding SAP Lease Contract
Management
LESSON OBJECTIVES
Contract Management Solution Design
Figure 17: Scenario
Figure 18: Lease Contract: Definition
Lesson: Understanding SAP Lease Contract Management
Lease Contracts are contractual agreements between lessors and lessees, where the lessor is
the legal owner of an asset and the lessee has the right to use the asset during a period of
time. For the right of use, the lessee pays lease payments.
Subjects of Lease Contracts include any of the following characteristics:
● Partners (lessor or lessee)
● Objects (rights of use for assets)
● Terms (contract start date, contract end date duration)
● Valuation rules and conditions
● Conditions (one-time or periodic lease payments)
Figure 19: Lease Contract and Their Relationship to Other Contracts
A contract in SAP is always a contract between a company and a business partner.

The company providing or consuming the right of use for assets is represented by the
company code of the contract, which is visible as part of the contract key (such as 1000/1;
contract 1 within company code 1000).
Lease Contracts use the functionality of the SAP contract.
Examples for lease-in contracts are mainly described in course RE050.
Unit 2: SAP Lease Contract Management
Figure 20: Contract Cycle
The contract cycle of Lease Contracts does not differ from the contract cycle of other
contract types, and contains the following characteristics:
● The posting of lease payments is possible only after the activation of the lease contract.
● A lease contract can be renewed after the primarily agreed contract duration.
● During the validity period, contract conditions can be adjusted.
Figure 21: Lease Contracts and Contract Valuation: Overview
The process of maintaining Lease Contracts can be described as follows:

● After the conclusion of a contract, the contract data is entered into the SAP system. The
agreed fees are entered as contract conditions (payment conditions).
● The posting and frequency data of the contract are also entered because they influence
the posting documents for the contract.
● After the contract activation, the lease contract is payment-relevant and therefore able to
participate in the periodic postings. For the processing of periodic postings for both
contracts with business partners with customer and vendor accounts the normal SAP RE
periodic postings transaction (RERAPP - Periodic Posting: Contract) is used.
The necessary settings and data for the contract valuation are described in the next chapter.
Figure 22: SAP Lease Contract Management SAP Real Estate Solution Design
Contracts in SAP Real Estate Management can also be used to represent Lease Contracts.
Different contract objects, such as real estate objects, cost centers, or so-called contract
objects and business partners are assigned to these contracts. Contract conditions and the
valuation rules related to these conditions are the precondition for the creation of payment
plans based on cash-flow items for the contracts.
Further functions include the use of accounting principles for specific valuation purposes
(IFRS 16, US-GAAP ASC 842, linearization, and local accounting principles), the calculation
and display of valuation cash flows, and the direct integration into asset accounting to
manage the right of use asset.
FI integration functionality is enhanced with functions for multi-GAAP postings. There are
additional transactions for the processes of contract valuation and update.
Further information about Lease Contracts you be found in SAP note 2255555 Release note:
Valuation of Leasing contracts.
Lease Contracts
Figure 23: Lease Contract: Cashflow
For the valuation process, a new cash flow for Lease Contracts, the valuation cashflow, is
used. Whereas the partner cash flow is responsible for the partner-related postings (postings
on vendor accounts in case of lease-in contracts), the valuation cashflow represents the basis
for the contract valuation process.
Figure 24: Contract Data
Functions included in the lease contract concept are as follows:

● Contract type concept (credit-side or debit-side definition)
● Business partner integration
● Runtime management (for renewal and notices)
● Resubmissions and reminders

● Direct integration into FI and CO
● Time-slot-precise conditions and condition adjustment (for example consumer price
index)
● Document management.
Figure 25: Involved Parties
Business partners with customer accounts are assigned to debit contracts and business
partners with vendor accounts are assigned to credit contracts. For example, the following
business partner rules can be used for Lease Contracts:
● TR0602 landlord with vendor account
● TR0604 partner with vendor account
● TR0600 tenant with customer account
● TR0603 partner with customer account.
Figure 26: Contract Objects
Contract objects of Lease Contracts can be real estate objects as well as equipment, cost
centers, and so-called contract objects. The following object types can be used for Lease
Contracts:
● Building
● Property
● Equipment
● Cost center
● WBS element
● Internal order
● Plant maintenance order or service order
● Functional location
● Business entity
● Rental object
● Architectural object
● Contract
● Contract object.
The object assignment for the object types above is time-dependent. Contract objects (object
type J4) can be freely defined to represent different types of contract objects.
Contract objects do not have separate master data objects, as they only exist in the
contracts. Different types of contract objects can be differentiated by contract object type. To
do so, a contract object type can be chosen as an attribute for the contract object within the
contract. During the process of balance sheet valuation the contract object type can be used
a criterion for determining the asset class. As contract object types can be defined in
Customizing, this attribute can be used to represent a dedicated portfolio structure for lease
contracts. Contract types can be assigned to contract object types in order to differentiate
account determination settings. As different accounts should be used per contract type and
contract object type, account determination values are mandatory. After defining the possible
account determination values, they should be assigned to the various combinations of object
types and contract types. The account determination value cannot be blank. Depending from
contract object types the asset class of the right-of-use asset (to be created for the leased
object) can be defined. In case of a missing asset class definition for the exact combination of
contract types and object types (together with company code and other differentiation
criteria), the asset class will be derived using the following sequence:
1. Company code, object type, object differentiation criterion
2. Company code, object type, contract type
3. Company code, object type
4. Company code, contract type
5. Company code
Figure 27: Notice and Renewal
Lease Contracts contain terms for contract notices and contract renewals. Both types of
terms (notice terms and renewal terms) can be defined with reference to predefined
customizing rules or as individual rules for the contract. Notice procedures can be used for
contracts without fixed terms. Standard and individual contract notice procedures consist of
notice rules, which are either periodic regulations (month end, quarter end, year end) or
deadline regulations (such as three months on May 31 or six months on September 30).
Renewal rules can only be used for contracts with fixed terms. To become effective, options
for renewals must be accepted by the contract partners. Options for renewals must be
activated in the system. Within the contract, functions for the simulation of notices and
renewals are available to create a critical date list for notices and renewals.
Figure 28: Critical Contract Dates and Resubmission Rules
Resubmission rules can be defined within contracts to define reminders for critical contract
dates, such as those related to notice or renewal terms. Resubmission can be defined as
periodically recurring or single resubmission with different resubmission reasons. For
example, resubmission is used to check contract data or locations before accepting renewal
options or for periodic checks of contract objects and conditions. The reminders created
appear in the to-do-list of the responsible for the lease contract user or user group.
Figure 29: Contract Processing for Lease Contracts
Lease Contracts can be processed with the contract processing transaction (transaction
RECN (process contract)). To separate the maintenance of contract data between contract
managers and accountants responsible for valuation-relevant contract data, a second
transaction RECECN (Edit Contract Valuation) can be used. Additional authorization objects
for valuation-relevant data (F_RECE_*) are available.
Figure 30: Transactions for Lease Contract and Valuation
The following new transactions for Lease Contracts and their valuation are available:
● RECECN - Edit Contract Valuation (process contracts for the maintenance of the valuation
with a different screen sequence compared to transaction RECN; whereas the access to
valuation data and normal contract data is controlled by separate authorizations)
● RECEISRULECN- Valuation Rules for Contracts - creating and changing valuation rules
using mass maintenance (maintainable ALV)
● RECEPR - Perform Contract Valuation - mass run for the creation of valuations on the
basis of the valuation parameters
● RECESH - Display Contract Valuation (cash flow and process) - summary report
● RECEEP - Post Valuation for Contracts
● RECEEPRV - Cancel Valuation for Contracts
The known transactions for the contract maintenance, such as RECN (Process Contract) and
RE80 (Real Estate Navigator), are available and can also be used to process Lease Contracts.
LESSON SUMMARY
Unit 2
Lesson 2
Understanding contract conditions
LESSON OBJECTIVES
Contract Conditions
Figure 31: Scenario
Figure 32: Lease Payments: Attributes
Lease payments are posted during the regular periodic postings run. One-time conditions are
posted once during the relevant posting run, while periodic conditions are posted with the
defined in the contract periodicity.
Contract conditions can be both relevant for payments (representing liabilities or receivables)
or used for informational purposes (statistical conditions).
Lesson: Understanding contract conditions
Statistical conditions will not be posted in accounting processes. For statistical conditions, no
cash flow items will be created. Statistical conditions can be used, for example, to represent
payments before closing the lease agreement (such as usual market prices) or to represent
the service part of other conditions.
Both debit or credit conditions can be used for lease contracts. This course is focused on the
lease contracts with credit conditions.
Figure 33: Lease Payments: Calculation Formula
There are different pre-defined calculation formulas for contract conditions. These calculation
formulas can be used for lease contracts.
Examples for the calculation of lease payments are the calculation depending on the square
meters of the leased building, or the calculation of service fees as a percentage of the lease
payments.
Figure 34: Lease Payments: Conditions
Lease contracts contain contract conditions representing the agreed lease payments. The
following types of contract conditions can be used:
● regular periodic payments (for example, lease payments, service fees, rental fees, advance
payments)
● one-time or extra payments (for example, initial costs, cost for removal of installations,
additional fees, sales based rents)
For each condition type has to be defined whether it is taken into account for valuation and in
which way. In particular, valuation can be carried out on the basis of statistical conditions
which do not create partner cash flow items and therefore do not trigger postings. In
connection with the valuation process, however, these statistical conditions provide the
option to specify the contract in a very differentiated way from the valuation view. The
relevant condition valuation property can be defined for the conditions (default setting in
Customizing, but can be changed manually in the contract for each valuation rule).
Examples for available values are:
● Lease Installment (A)
● Initial Costs (B)
● Present Value Specified (C)
● Net Worth Value Specified (F)
● Depreciation (G)
● Cash Surrender Value (D)
● Remaining value guarantee (E)
● Asset Retirement Obligation (R)
● Penalty Payment (S)
● Transfer Posting/Linearization (U)
● Incentive (I)
● Sublet (V)
● Miscellaneous (X).
Detailed information about condition valuation property will be provided in the contract
valuation chapter.
Figure 35: Adjustment of Conditions
Lesson: Understanding contract conditions
During the life time of a lease, contract conditions can vary depending on different time slots.
Reasons for adjustments are as follows:
● Graduated payments
● Adjustment of the lease rates following Consumer Price Index (CPI) or other rules and
indexes
● Manual adjustments of contract conditions (for example, because of renegotiation).
More detailed information about the influence of condition changes will be provided in later
chapters of this course material.
Posting Parameters
Figure 36: Posting Parameters
Posting parametersof the lease contract are influencing the posting documents created
during different periodic postings runs. Posting parameters include information about
payment methods, bank data, the related business partner, and the currency (especially in
case of contracts with multiple currency).
Frequency parametersalso provide information necessary for the posting documents, for
example, payment frequency (month, quarter, year), information about the calculation
method (for example, in advance or mid-term) and the due date calculation.
Organizational assignment parameterslike profit center or business area can be defined per
contract. The organizational assignment information defines additional controlling
documents, for example, profit center documents.
All of these posting parameters are time-dependent.
Figure 37: Cash flow and Periodic Postings
Based on contract conditions and configuration settings related to conditions (account

determination and so on), cash flow items for lease contracts are created.
Cash flow items are only created for non-statistical condition positions.
During the process of periodic postings using transaction RERAPP (Periodic Posting:
Contract), planned cash flow items are posted and converted to actual items.
LESSON SUMMARY
Unit 2
Lesson 3
Describing Examples for Lease Contracts
LESSON OBJECTIVES
● Describe different examples for lease contracts
Periodic Posting
Examples of Lease Contracts
● Example 1: Lease-in of a new office space (in arrears)
● Example 2: Lease-in of a new office space (in advance contracts)
● Example 3: Lease-in of a storage building
Figure 38: Scenario
Figure 39: Example 1: Lease-In of a New Office Space (in Arrears)
Figure 40: Example 1: Lease-In of a New Office Space (in Arrears)
To determine the value of the Liability, the Repayment for each period has to be calculated
with the specified Interest Rate (in this case 6%).
The sum of Repayments for all periods is the value of the Liability.
This example is using the straight-line approach for the Depreciation. This means that the
yearly Depreciation Value the RoU is divided by the number of periods.
Figure 41: Example 2: Lease-In of a New Office Space (in Advance)
Figure 42: Example 2: Lease-In of a New Office Space (in Advance)
This example contains payments which are due in advance.
Lesson: Describing Examples for Lease Contracts
Interest is calculated at the end of the period. This means that it is necessary to differentiate
between the Present Value of the Liability at the beginning of the period and at the end of the
period.
Figure 43: Example 3: Lease-In of a Storage Building
Figure 44: Example 3: Lease-In of a Storage Building
The lessee exercises the renewal option in this example which leads to an overall term of 8
years.
The broker's fee increases the value of the Right-of-Use but is not included in the calculation
of the Liability because it is treated as Initial Costs for the calculation process.
This example also includes maintenance fees which are classified as service costs and
therefore not relevant for the valuation.
As in the previous example, the payments are due in advance which leads to a differentiation
between Present Value of Liability at the beginning of the period and the end of the period.
https://sap.plateau.com/icontent_e/CUSTOM_eu/sap/self-managed/ebook/RE050_EN_C... 11/14/2018
Unit 2
Learning Assessment
1. Please describe the different parties involved in lease contracts and the relationships
between these parties.
2. Which objects can be used in lease contracts?
3. Please explain at least two contract conditions for lease contracts and their behavior
regarding cash flow and posting
4. Please explain different valuation rules and the relationship between valuation rules and
contract conditions.
5. What are condition valuation properties (properties of contract conditions in the valuation
context)?
Choose the correct answers.
X Measurement of the Lease Liability
X Measurement of the Right of Use
X Off balance-sheet accounting
X Transition Approach
X Not to consider
Unit 2
1. Please describe the different parties involved in lease contracts and the relationships
between these parties.
and lessees. The lessor is
2. Which objects can be used in lease contracts?
The Cost
3. Please explain at least two contract conditions for lease contracts and their behavior
regarding cash flow and posting
for these conditions no cash flow

items will be created. Statistical conditions can be used
For these conditions cash flow

items
4. Please explain different valuation rules and the relationship between valuation rules and
contract conditions.
-
and their attributes. To each
well.
5. What are condition valuation properties (properties of contract conditions in the valuation
context)?
X Measurement of the Lease Liability
X Measurement of the Right of Use
X Off balance-sheet accounting
X Transition Approach
X Not to consider
UNIT 3 Contract valuation and

posting
Lesson 1
Explaining valuation data and contract conditions 39
Lesson 2
Understanding contract valuation 53
Lesson 3
Describing condition valuation properties 68
UNIT OBJECTIVES
● Explain relationship between valuation data and contract conditions
● Understand valuation rules for lease paymens
● Processing contract valuation
● Describing contract valuation data and valuation results
● Explain condition valuation properties
Unit 3
Lesson 1
Explaining valuation data and contract
conditions
LESSON OBJECTIVES
● Explain relationship between valuation data and contract conditions
● Understand valuation rules for lease paymens
Valuation Data and Contract Conditions
Figure 45: Scenario
Figure 46: Lease Contracts and Contract Valuation: Overview
Contract data and contract conditions were described in the previous chapter.
Unit 3: Contract valuation and posting
Based on this preconditions the valuation process for lease contracts can be described as
follows:
As a first step the valuation data for a lease contract must be defined. The relevant valuation
rules for the contract have to be entered and assigned to the contract conditions. Afterwards
it has to be checked whether there are further conditions which are necessary for the contract
valuation (such as initial costs and so on). These conditions must be entered as statistical
conditions (without creation of cash flow items for such conditions).
If the valuation information of the lease contract is completed, the valuation process can be
started. After the analyze of the valuation results the valuation postings run can be started.
Figure 47: Examples for Valuation Data and Contract Conditions (I)
The following special cases can occur regarding the valuation process:
Example 1
In addition to the contract conditions there are other fees which are relevant for the valuation-
process, but not relevant for payment, for example, initial costs for the lease contract. These
costs can be represented as statistical conditions. In case of statistical conditions (with
condition purpose "statistical one-time" or "statistical") no cash-flow items are created,
therefore such conditions are not relevant for periodic postings. On the other hand side,
statistical conditions can be used for valuation purposes.
Example 2
There are several contract conditions (for example, rental fee for an office and rental fee for a
storage). From the point of view of the valuation both conditions have to be valuated together.
Example 3
From the valuation perspective there are other/more detailed requirements than from the
perspective of the original contract. In this case different attributes of conditions are
necessary in relation with the valuation. These attributes can differ between the different
valuation rules. In some cases the existing contract conditions are not detailed enough, for
example, if the condition has to be split into conditions for several objects (as the valuation
result is necessary per object).
Lesson: Explaining valuation data and contract conditions
Figure 48: Examples for Valuation Data and Contract Conditions (II)
Example 4
The same contract condition must be valuated using different valuation methods (for
example, IFRS and US GAAP). In this case one contract condition needs to be connected with
two valuation rules.
Example 5
The transaction or the processing of lease contracts is the “normal" contract processing
transaction (RECN). As there is the requirement for a separate maintenance function for
valuation-relevant contract data, an additional transaction RECECN (Edit Contract Valuation)
was developed. Using these two transactions with different authorization objects the contract
maintenance activities can be separated between the contract manager and the accountant,
responsible for the valuation data and the balance sheet.
Example 6
SAP Real Estate Management is used already and has to be extended with valuation
functionality. In this case, the existing contracts can be enhanced with additional registers
and functions related to the valuation-relevant data. Therefore it is not necessary to use other
contract types or to migrate the existing contracts.
Figure 49: Valuation Data for Lease Contracts
In order to define valuation data for lease contracts the following questions must be
answered:
● Is the contract relevant for the valuation process?
● Which accounting principle (which different accounting principles) is relevant for the
valuation of a lease contract?
● Which of the contract conditions are relevant for the valuation process?
● Are there other conditions (like initial costs) necessary for the valuation process and the
calculation of valuation values?
After answering the questions above the correct valuation rules for the contract can be
chosen, the contract conditions can be assigned and - if necessary - additional statistical
contract conditions can be created.
Figure 50: Valuation Relevance
Contract master data contain an attribute defining the valuation relevance of a lease contract.
The available field values for this field can be freely defined by the customer during the
customizing process (for example, for the definition of contracts relevant/not relevant for the
valuation process, low value leases, short-term leases and so on).
The valuation relevance field can the used for reporting purposes. In addition per field value of
the valuation relevance can be defined whether the related contracts are relevant for the
valuation process or not.
If a contract is not relevant for the valuation process the valuation tab of the contract is
hidden while processing the contract in the system.
Per customizing value it can be defined whether a value of the valuation relevance field is
relevant or not relevant for the valuation process.
Valuation Rules
Figure 51: Contract Design: Overview
For the valuation of lease contracts, different accounting principles can be used. In the
contract data, different valuation principles (for example, IFRS, US GAAP) are represented by
different valuation rules. These valuation rules in combination with different contract
conditions, objects, and terms (posting parameters, frequency parameters) define the basis
for the valuation process.
Valuation postings influence accruals and deferrals posted via transaction RERAALCN
(Accrual/Deferral: Contracts), too. As described in SAP note 2441863 (Accrual/deferral of
the valuation cash flow) the accounting principle to be used for accruals and deferrals can be
is defined in the assigned transfer posting valuation rule. If no accounting principle is
assigned, the default accounting principle will be used. In the case that no transfer posting
valuation rule is defined for the payment cash flow, the cash flow items will not be accrued/
deferred. For accruals and deferrals of object cash flow items the default accounting principle
will be used. Valuation cash flow items for transfer posting rules usually will be accrued/
deferred using the accounting principle of the corresponding cash flow item, whereas
valuation cash flow items for activation and/or linearization valuation rules are no objects of
accruals and deferrals. For these items and valuation rules, the clearing account represents
the accruals and deferrals account
Figure 52: Valuation Rules
The creation of a new valuation rule used for valuations under IFRS16 includes the following:
● The definition or assignment of an object
● The definition of lease terms and conditions
● The definition of an interest rate for the contract valuation
The lease term is suggested from the contract term.

Contract conditions will be automatically assigned to the valuation rules.
Valuation rules include information about the following:
● The valuation type (defining the algorithm based on which the cash flow is calculated for
the valuation and it is important for the account determination)
● The condition valuation group (defining which contract conditions are used in the valuation
calculation).
Figure 53: Example for a Valuation Rule for IFRS
Figure 54: Example for a Valuation Rule for US GAAP
Figure 55: Example for a Valuation Rule for German Commercial Code (HGB)
Figure 56: Accounting Principle
The accounting principle represents the legal regulations according to which financial
statements have to be processed, such as:
● IFRS ("International Financial Reporting Standard")
● US GAAP ("Generally Accepted Accounting Principle").
A ledger (ledger group) in SAP Finance Customizing can be assigned to an accounting

principle. This assignment defines in which ledgers (ledger groups) the posting documents
related to the accounting principle will be posted.
Documents without the definition of an accounting principle will be posted to all ledgers.
Several different accounting principles (for example, IFRS and US GAAP) can be combined
into one accounting principle. Such a combination of accounting principles is used for
performance reasons.
Example
If your business reflects both IFRS and US GAAP in your system, in the application Manual
Accruals, you have to create one accrual item for each accounting principle. The accruals are
identical for IFRS and US GAAP. Therefore you only have to create one accounting principle in
the system, for example, IFRS/US GAAP for Accruals.
Figure 57: Valuation Type
The valuation type defines the type of valuation. The following valuation types can be used:
● Transfer posting (the associated conditions are transfer posted to the account assignment
object specified in the valuation rule (for example, HGB)).
● Linearization (the associated conditions are linearized over the contract term (for
example, FASB 13))
● Balance-sheet capitalization (Balance-sheet capitalization used (for example, IFRS or US-
GAAP)).
According to linearization, the following different calculation algorithms can be used here:
● From open period (linearization)
● From start
● From consideration start
● From open period (payment).
Figure 58: Condition Valuation Group
Contract conditions are considered in the valuation process in different ways. After the
definition of contract valuation groups (for example, . for IFRS, US-GAAP), condition types
have to be assigned to these condition valuation groups.
The assignment of condition types to condition valuation groups also includes information
about the following:
● The relevant external condition purpose (for example, actual or statistical rent)
● The valuation property to be used
● The consideration of this condition during the valuation process.
Example 1
In some cases, payments for contracts (for example, initial costs) have already been posted in
advance and should not be posted again in SAP Real Estate Management. On the other hand
side these payments are necessary to calculate the value of the RoU asset.
To consider initial costs for the value of the RoU asset, a one-time statistical condition can be
used.
Example 2
If a contract includes several different contract objects, but only one payment condition, the
valuation nevertheless must be processed for each contract object. In the described case, an
estimation must be made to define which share of the payment condition is related to which
of the contract objects. The result of this estimation can be included into the contract as a
statistical condition with reference to the relevant contract object. In the valuation process
this statistical condition can be used as a basis for the valuation for the different contract
objects.
Figure 59: Classification of Conditions
The consideration of a contract condition in the valuation process is performed depending on

the classification. Parallel to classification you can define whether a condition is relevant for
the valuation or not.
The following consideration types are available:
● Full consideration
● Percentage consideration (for example consideration of 80%, the other 20% are
considered as service costs)
● Absolute share
● Not taken into account.
Figure 60: Valuation Properties
The property of a condition in the context of the valuation can be specified by the Condition
Valuation Property. The following values are available:
Measurement of the Lease Liability
● A – Lease Installment (for fixed and variable payments)

● E – Remaining Value (for expected amounts under residual value guarantees)
● D – Cash Surrender Value (for example the price of a purchase option)
● S – Penalty Payment
● I - Incentive
● V - Subletting
Measurement of the Right of Use

● B – Initial Costs
● R – Asset Retirement Obligation (for costs in dismantling and removing the asset)
● G – Depreciation (for impairment losses)
Off balance-sheet accounting

● U – Transfer Posting/Linearization
Transition Approach
● C – Present Value Specified
● F – Net Worth Value Specified
Not to consider
● X - Miscellaneous
Figure 61: Valuation Rules and Contract Conditions
Different valuation rules can be assigned to different contract conditions in an n:m-

relationship.
One valuation rule (for example, IFRS leasing) can be assigned to several contract conditions
(for example, lease payment and initial costs).
On the other hand side, for one contract condition (for example, lease payment) different
valuation rules (for example, IFRS and US GAAP) can be used.
Figure 62: Valuation cash flow
In the contract overviews tab of a lease contract, the following reports are available:
● Valuation process
● Valuation cash flow
● Valuation postings
The function of transaction RERAPP for the posting of the partner and object cash flow can be
used unchanged. For valuation-relevant contracts and conditions, the object cash flow is no
longer available as of the start of valuation (or the start of posting). The function of the object
cash flow is replaced by the valuation cash flows.
Statistical conditions, for example, initial costs, are visible in the valuation cash flow too.
Figure 63: Information System and Mass Maintenance Transactions
Transactions of the valuation information system, such as RECEISRULECN (valuation rules in

contracts) and RECEISCONDRULECN (condition-specific valuation rules for contracts) can be
used for mass maintenance of valuation rules. Using maintainable list viewer reports (ALV),
valuation rules and conditions in relation to the relevant valuation rules can be inserted,
changed, or displayed.
Unit 3
Lesson 2
Understanding contract valuation
LESSON OBJECTIVES
● Processing contract valuation
● Describing contract valuation data and valuation results
Contract Valuation
Figure 64: Scenario
Figure 65: Contract Valuation
The basis and the steps of the valuation process are described in this lesson. The lesson also
details examples of the valuation cash flow and its structure. In addition, functions of the
information system for the valuation process are explained.
Figure 66: Valuation Process
Once the initial contract data has been maintained, the system can perform the valuation
process. The valuation process has the following steps:
● Assign Valuation Rule
● Check Condition Consideration
● Set Rule Status to Complete
● Automatic Asset creation (if Integration Type is defined as Asset Accounting)
● Perform Valuation
● Post Valuation.
Figure 67: Change Events During the Process of Contract Valuation
The process of contract valuation is influenced by different events during the contract
lifetime. Adjustments of contract conditions (for example, following the consumer price
Lesson: Understanding contract valuation
index) influence the contract valuation as well as changes in the contract duration, changes of
contract terms, or changes of contract objects.
All of these change events trigger changes in the status of valuation data and therefore
changes in the valuation process for the related contracts. These changes for their part effect
payment postings and valuation postings.
Figure 68: Payment-Relevant Postings and Valuation Postings
The transaction RERAPP (periodic posting) is used for the posting of the partner and object
cash items. This transaction is used also for Lease contracts and therefore remains
unchanged.
For lease contracts relevant for valuation, the object cash flow is not longer used for the
posting process. The object cash flow is replaced by the valuation cash flow.
For valuation, cash flow is posted using the new developed posting transaction RECEEP. This
transaction can be used for the posting of pending cash flow items with the assigned
contract-specific accounting principles.
For the process of valuation posting, it is not necessary to post the partner cash items.
During the periodic postings process, posting documents for all relevant ledgers are posted,
whereas during the valuation postings process only the ledgers with relevance for the present
valuation rule are posted.
Valuation Results
Figure 69: Periodic posting all ledgers
The figure, Periodic Postings (All Ledgers), shows the posting of lease payments which are
posted against the Leasing Creditor (vendor/accounts payable) using the Lease Clearing
account in all defined ledgers. In the example posting for the first year is shown.
Figure 70: Valuation Transfer Posting Cashflow
Figure 71: Valuation: Example for a Balance-Sheet Cashflow
The calculated values are displayed on a dialog box when simulating or conducting the
contract valuation. On the first tab, the acquisition posting is displayed. The status icon
indicates if the posting has already been made.
Figure 72: Valuation: Depreciation Cashflow
Figure 73: Valuation: Commitment Cashflow
The payment tab shows all relevant leasing payments.

The status icon displays if the posting has already been made. Therefore you can see which
postings have already been made.
Inside the table, the calculation period is displayed with the number of days used to the
calculation (30 days for every month/360 days per year or the exact number of days). The
number of days per month is taken from the frequency term of the contract.
Figure 74: Valuation: Interest Cashflow
The status icon displays if the posting has already been made.
You can also see if postings have already been made.
Inside the table the calculation period is displayed with the number of days used to the
calculation (30 days for every month/360 days per year or the exact number of days).
Figure 75: IFRS Leasing for Lease in contracts
The following pages will show example postings in multiple ledgers. For the given example, the
following ledgers will be used:
● HGB
● IFRS
● US GAAP
Describing the account determination for valuation posting processes both balance sheet and
profit and loss related accounts are relevant. In detail, the following accounts have to be
considered:
Balance Sheet:
Right of Use Asset
Asset Clearing
Lease Clearing
Lease Liabilities
Lease Creditor
Profit and Loss:

Interest paid
Depreciation
Lease Expense
The posting process described in the following slides contains posting documents which are
posted for all ledgers as well as ledger-specific posting documents.
Figure 76: IFRS Leasing for Lease in contracts (all ledgers)
Posting A (Lease Payments)

The Lease payments are posted against the Leasing Creditor (vendor) using the Lease
Clearing account in all defined ledgers.
Figure 77: IFRS Leasing for Lease in contracts (HGB)
Posting H (Transfer Posting)

For the German Commercial Code ledger the Lease Expense is posted against the Lease
Clearing account.
No Right-of-Use Asset or Lease Liability is recognized on the Balance Sheet for HGB.
Figure 78: IFRS Leasing for Lease in contracts (IFRS 16)
Posting 1 (Asset Value)

In the IFRS ledger the Right-of-Use Asset has to be capitalized on the Balance Sheet which is
posted against the Lease Liability.
Posting 2 (Interest)
The Interest Expenses on the P&L Sheet are posted against the Lease Liability.
Posting 3 (Depreciation)
Depreciation by the assigned calculation method is posted against the RoU Asset because it
decreases the remaining Asset value.
Posting 4 (Payment)
Payments decrease the remaining Lease Liability which is posting against the Lease Clearing
account.
Figure 79: IFRS Leasing for Lease in contracts (US GAAP)
Figure 80: IFRS Leasing for Lease in contracts (multiple ledgers)
Figure 81: IFRS Sublease
Figure 82: Account Approach
In case of the account approach, you will post only to the leading Ledger.
To differentiate between multiple accounting principles, you have to set up different accounts
as illustrated above (for example, IFRS: Clearing and HGB: Clearing).
In order to post to multiple accounts it is required that you use different flow types or different
account determination values.
Figure 83: IFRS Leasing for Lease in contracts Account Approach
Figure 84: IFRS Real Property Leasing SAP Real Estate Solution Approach
Figure 85: Asset Accounting Integration
The Asset is linked to the contract in RE-FX as can be seen in the 'Objects related to asset'
section of the Asset values.
It is possible to navigate through the different Ledgers linked to the Depreciation Areas.
The Asset Acquisition value is displayed
The lower part of the screen shows which Asset Transaction Type was used for the Asset
posting.
Figure 86: Depreciation Posting
The actual depreciation is not posted directly to the Asset from the RE-FX.
During the Contract Valuation, the system calculates the depreciation values according to the
Valuation Rule.
The Calculation Method contained in Depreciation Key for the Asset Class determines that
the depreciation values are calculated externally (in this case by Real Estate Leasing).
After posting the Contract Valuation to the Asset (using Transaction RECEEP), the calculated
depreciation values are visible as Planned Depreciation in the Asset Values.
The actual posting of the Planned Depreciation is done via the normal Depreciation Run in
Asset Accounting.
Figure 87: Valuation information system
The following transactions can be used for reporting purposes:

● RECEISRULECN (valuation rules in contracts): this report can be used for reporting
purposes as well as for creating and changing valuation rules using mass maintenance
(maintainable ALV)
● RECEISCONDRULECN (condition-specific valuation rules for contracts): this report can be
used for reporting purposes as well as for creating and changing condition-specific
valuation rules using mass maintenance (maintainable ALV)
● RECESH (display contract valuation): this report displays the results of the valuation
process. Valuation logs and valuation results for acquisition, depreciation, payment,
interest and special flows can be displayed from here as well. For the selected contracts or
valuation identifications process data or the valuation cash flow based on periods can be
listed.
Furthermore, the following reports are available in the contract summaries:

● Valuation cash flow: The report displays the relevant current cash flow set together with
other valuation-relevant information (for example, opening and closing stocks of the fixed
asset and of the leasing liability)
● Valuation process: This report displays the status of the valuations.
Unit 3
Lesson 3
Describing condition valuation properties
LESSON OBJECTIVES
Valuation Properties
Figure 88: Scenario
Figure 89: Condition Valuation Properties: Special Cases
There are several special cases for condition valuation properties, which are described in the
present lesson.
Examples for special condition valuation properties are as follows:
● Initial costs
● Rent incentives
Lesson: Describing condition valuation properties
● Asset default values

● Residual values
● Different end of usage date
● Asset retirement obligations
Figure 90: Initial Costs (I)
Initial costs (for example, broker's fees) occur when the contract is concluded. Such amounts
increase the value of the asset at the time of capitalization.
All initial costs are either assigned to the one-time statistical posting or to the one-time
posting external condition purpose. The amounts of these one-time conditions (irrespective
of their validity) form, in total, the initial costs that increase the asset value initially.
For the described initial costs, the valuation cash flow item is created to the purpose, which
transfer posts the costs for specific accounting principles.
Figure 91: Initial Costs (II)
Initial costs are shown on the special flow tab of the valuation result. Initial costs directly
increase the overall Right-of-Use value in the same amount.
Table 1: Calculation Example

Right-of-Use (old) 31.972,37
+ Initial costs 10.000,00
= Right-of-Use (new) 41.972,37
Figure 92: Rent Incentive (I)
When a lessee makes use of a rent incentive granted by the lessor, the contract valuation will
be influenced.
Just as with the initial costs a rent incentive will only effect the value of the Right-of-Use asset
and leaves the liability untouched.
In this particular case, the Right-of-Use will be lower than the Liability by the value of the rent
incentive.
Figure 93: Rent Incentive (II)
A rent incentive is shown on the special flow tab of the valuation result. The rent incentive
directly decreases the overall Right-of-Use value in the same amount.

Right-of-Use (old) 31.972,37
– Rent incentive 3.000,00
= Right-of-Use (new) 28.972,37
Figure 94: Asset Default Value (I)
If the system has to calculate with a given Right-of-Use default value, this value can be
specified as a condition (statistical one-time condition).
Figure 95: Asset Default Value (II)
The delta between Right-of-Use and Present Value of the Lease Liability will lead to a Positive
or Negative Equity Change.
The system automatically creates a posting for the Liability difference which can be seen in
the Valuation Cash Flow.

Asset Default Value 33.000,00
– Present Value Specified 28.000,00
= Liability Difference 5.000,00
Figure 96: Asset Retirement Obligation (I)
If there are any asset retirement obligations for the lessee, those obligations have to be
considered for the calculation of the Right-of-Use value.
However, Asset Retirement Obligations do not impact the calculation of the Liability.
Figure 97: Asset Retirement Obligation (II)
The Asset Retirement Obligation condition defines (irrespective of their validity) are to be
applied for a retirement and increase the net worth value.
Figure 98: Asset Retirement Obligation (III)
Asset Retirement Obligations are shown as special flow on the special flow tab.

Present Value 31.972,37
+ Asset Retirement Obligations 2.000,00
= Right-of-Use Asset 33.972,37
Figure 99: Different End of Usage (I)
The End of Usage date for the Right-of-Use asset can be set manually when assigning the
Valuation Rule parameters.
If no End of Usage is specified, the system will automatically calculate with the end of the
contract term.
If the End of Usage has been set to an earlier date than the end of the contract term, the
system will use the manually set end of usage date as valuation period.
Figure 100: Different End of Usage (II)
Right-of-Use and Liability do not develop in the same way when the End of Usage is changed
to an earlier occurrence. This leads to a liability difference which is displayed on the Special
Flow tab of the Valuation result.
Figure 101: Residual Value (I)
It is possible to assign a Residual Value to the Leasing Contract. Residual Value defines the
amount of open Liability at the end of the contract term.
The Residual Value does not influence the Right-of-Use or Depreciation calculation.
Figure 102: Residual Value (II)
The Residual Value can be specified using a statistical one-time condition with the
corresponding Valuation Property.
Figure 103: Residual Value (III)
The valuation cash flow shows that the Liability at the end of the contract (in the closing
balance of the last period of the contract term) is of the same amount as specified as Residual
Value.
Figure 104: Lease Contracts: Special Cases
The following special cases can occur regarding lease contracts:

Example 1
In the basic rent of a lease contract a specified amount of service charges is included. The
valuation relevant part of the basic rent has to be defined. The share can either be an absolute
amount or a percentage.
Example 2
The contract conditions of a lease contract do not have the necessary conditions for the
valuation granularity. Additional statistical conditions or condition shares (percentages) are
necessary for valuation purposes.
Example 3
The probable end of contract has to be defined.
Example 4
If enhancements of the standard system behavior are necessary in the customer system,
several enhancement implementations/Business AddInns (BAdI) for validations and
substitutions for lease contracts and for the valuation process are available.
Figure 105: Service Charge Included in Condition
If the basic rent includes a specified amount of service charges, the valuation relevant part of
the basic rent can be defined manually.
The share can either be entered as an absolute amount or using a percentage.
Example
If a contract includes a basic rent of €14.100 without any service fees specified, it is possible
to only consider a specified amount as Lease Installment for the actual Contract Valuation.
Figure 106: Use of Statistical Conditions
The use of statistical conditions allows you to assign conditions which should not be
considered during the periodic posting.
Example
Service costs which are not posted to the vendor during periodic posting.
The lease contract contains lease and non-lease components (for example, maintenance
service).
Several suppliers provide similar maintenance services.
(See Example 12 of the IFRS16 Illustrative Examples published by the IASB.)
Figure 107: Enhancement Implementations
The following Business Add-Ins (BAdIs) support enhancements to the standard functions for
the contract valuation process:
● BADI_RECE_EVALUATION (used to influence general functions)
● BADI_RECE_EVALUATION_RULE (used to influence functions in the context of the
valuation rule)
● BADI_RECE_EVALUATION_PROCESS (used to influence functions in the context of the
valuation process)
● BADI_RECE_ASSET_ACCOUNTING (used to influence functions in the context of asset
integration).
In addition Business Add-Ins related to the contract (for example, BADI_RECN_CONTRACT)

can be used too.
LESSON SUMMARY
Unit 3
Learning Assessment
1. Describe the purpose of the RERAPP and RECEEP transactions and the difference between
these transactions.
2. Explain the necessary steps of the valuation process.
3. Explain the posting process and posting documents for the periodic postings (regarding
all ledgers)
4. Explain the valuation cash flows and postings (acquisition, depreciation, commitment,
interest).
5. Name and describe at least three special cases for condition valuation properties.
Unit 3
1. Describe the purpose of the RERAPP and RECEEP transactions and the difference between
these transactions.
Transaction RERAPP
-
relevant contract conditions is
The valuation cash flow is RECEEP Valuation
-
RERAPP
RECEEP
valuation
2. Explain the necessary steps of the valuation process.
and Post valuation.
3. Explain the posting process and posting documents for the periodic postings (regarding
all ledgers)
of different levels:
4. Explain the valuation cash flows and postings (acquisition, depreciation, commitment,
interest).
For valuation-
valuation cash flows as of the
Valuation cash flows are relevant for the valuation RECEEP. In the
valuation cash flow information
other valuation-relevant
5. Name and describe at least three special cases for condition valuation properties.
-
of-
-of- one-
the
-of-
has been set to an earlier date
-of-
-of-
UNIT 4 Change Management
Lesson 1
Performing contract condition changes 84
Lesson 2
Explaining contract renewals and terminations 87
Lesson 3
Understanding valuation behavior 95
UNIT OBJECTIVES
● Describe the influence of condition changes
● Understand the effect of contract renewals and terminations to the contract valuation
● Explain different valuation behaviors
Unit 4
Lesson 1
Performing contract condition changes
LESSON OBJECTIVES
Condition Changes
Figure 108: Scenario
Figure 109: Change Management
If an event occurs which directly changes a parameter that is integral to the contract valuation
result (for example, a conditions increase), the new Lease Accounting Standards require
Lesson: Performing contract condition changes
lessees to revaluate their Right-of-Use Assets and Liability on order to correctly reflect their
change of legal obligations on the balance sheet.
Examples are condition changes due to adjustment of condition runs or manual changes of
contract conditions. Both increasing and decreasing of condition amounts are possible.
Note:
Condition changes based on an index adjustment require a revaluation in IFRS but
not in US-GAAP.
Contract revaluations are also necessary after term changes (changes of the contract validity
data).
Examples for contract term changes are as follows:
● Contract renewals
● Changes of the probable contract end date
● Termination/notice of a lease contract.
● Most cases require a revaluation of the contract valuation based on the changes
mentioned above.
Figure 110: Contract Revaluation Process (I)
First of all the lease contract itself has to be changed in order to reflect the adjustment of
terms or conditions. In the case of condition changes, these changes can be triggered both
from manual condition changes or condition changes from adjustment of condition runs.
After the contract has been modified, the user has to define a new time slice using a Start of
Consideration date which differs from the initial contract valuation.
The system will calculate a new valuation cash flow which correctly represents the changes in
Right-of-Use or Present Value.
Unit 4: Change Management
Figure 111: Contract Revaluation Process (II)
The contract revaluation process (triggered from contract changes, such as condition
changes or contract term changes) includes the following steps:
● Recalculation of the liabilities (present value related to the payments from the change date
(with a new interest rate, if necessary)
● Recalculation of the Right of Use, if necessary (Due to the linearization in the asset
depreciation and the non-linear development of the liabilities the amounts of the asset and
the liabilities differ. This behavior is also possible in the case of US GAAP for operating
leases with initial costs).
● The difference for the increased present value will be added to the Right of Use.
LESSON SUMMARY
Unit 4
Lesson 2
Explaining contract renewals and terminations
LESSON OBJECTIVES
Renewals and Terminations
Figure 112: Revaluation: Absolute Difference
If the valuation behavior is specified as Absolute Difference, the system will only post the delta
between initial valuation and subsequent revaluation.
In this example in the figure, Revaluation: Absolute Difference, the RoU was changed to the
same extent as the lease liability (reduced). The (absolute) difference between the liabilities
(present value difference before or after change) is added to the Right-of-Use.
There is no effect in the income statement. However, this method is not always adequate.
Figure 113: Revaluation: Increase
The initial acquisition posting is still relevant and compared to the newly calculated overall
acquisition value.
The absolute difference is added to the initial acquisition value.
Only the absolute difference will be posted on the date which has been set as the
consideration start date.
Figure 114: Contract Renewal (I)
When a contract is renewed a revaluation is required. In order to do this, the valuation rule
needs a new time slice which specifies the date on which the renewal option has been
accepted and therefore needs to be taken into account when valuating the lease contract.
Lesson: Explaining contract renewals and terminations
Figure 115: Contract Renewal (II)
A renewed contract will lead to an increase in the RoU because of future lease rates.
Figure 116: Contract Renewal (III)
Extending the contract term will require a revaluation. The Leasing Solution automatically
detects changes to the contract term and will show this as reason for a revaluation.
A renewed contract will lead to an increase in the RoU because of future lease rates.
The Leasing Solution will create a new posting with the absolute difference between initial
Right-of-Use and Right-of-Use value as result of the revaluation.
Figure 117: Contract Termination (I)
If the lease contract is terminated early or the probable end date is set to an earlier date, the
initial Right-of-Use calculation is no longer valid.
Because future payments which have been included in the contract valuation will not occur
beyond the new contract end, the Right-of-Use and the Liability decrease compared to the
valuation result of the initial valuation.
Figure 118: Contract Termination (II)
An early contract termination leads to a reduced Right-of-Use value because future payments
which have been considered for the contract valuation no longer exist. The solution once
again posts only the delta between the initial and subsequent valuation.
Figure 119: Contract Termination (III)
The effects of the revaluation of the contract are also displayed when looking upon the
valuation result with regard to depreciation.
A significant change in Remaining Value can be seen for the period which first considers the
revaluation.
Additionally, a decrease in Depreciation per period is visible in the result.
Figure 120: Contract Termination (IV)
In this example the revaluation also included an adjustment of the interest rate used for the
contract valuation.
The valuation result displays which interest rate has been used to calculate the interest
expense for each individual period.
The large drop in interest expenses per period is directly related to the decrease in present
value as a result of the contract termination.
Figure 121: Revaluation: Decrease (I)
The initial acquisition posting is still relevant and compared to newly calculated overall
acquisition value.
The absolute difference is deducted from the initial acquisition value.
Only the absolute difference will be posted on the date which has been set as the
consideration start date.
Figure 122: Revaluation: Decrease (II)
The valuation result for the depreciation displays a change in depreciation values starting with
the year of the new consideration period.
Figure 123: Revaluation: Decrease (III)
The development of interests can be tracked on the corresponding tab of the valuation result.
Changes to the interest rate are also visible in the table.
Figure 124: Revaluation: Decrease (IV)
The revaluation from the lease contract modification leads to a liability difference as seen on
the special flow tab.
This liability difference will be posted as Profit from Change.
Figure 125: Revaluation: Scope Reduction
A change in the leasing contract changes the real value of the asset, for example, by returning
a part of the rented facility.
Example
Instead of the 10,000 m2 usable space, the tenant has only 7,000 m2 of usable space
available.
In this case, it is assumed that a separate contract had been concluded for the remaining part.
The respective contract shares for the Right of Use and the liability are determined first.
The current values of Right of Use and liability are reduced by the reduction factor.
Afterwards, the method of the absolute difference is then applied to this.
The described process is called scope reduction.
LESSON SUMMARY
Unit 4
Lesson 3
Understanding valuation behavior
LESSON OBJECTIVES
Valuation Behavior
Figure 126: Valuation Behavior: Absolute Difference
If a direct condition or term change is conducted when the system automatically detects that
the contracts needs to be revaluated.
The Leasing Solution supports different valuation behaviors, such as the following:
● Absolute Difference for subsequent valuation (4)
● Reduction for subsequent valuation (5)
● New Start for initial valuation (3)
● Relative Difference for subsequent valuation (2).
The valuation behavior field is only relevant for the valuation type Balance-Sheet
Capitalization. The calculation process for the absolute difference validation behavior is the
following:
In this case the existing asset is still used. The new asset value is calculated as follows:
New Asset Value
Figure 127: New Asset Value
Figure 128: Valuation Behavior: Reduction
For the reduction valuation behavior, the existing asset is still used. The reduction factor (=
numerator divided by denominator) is determined and multiplied by the remaining values:
● Asset reduction = remaining value of the asset before new valuation x reduction factor.
● Leasing liability reduction = remaining value of leasing liability before new valuation x
reduction factor.
The difference between the reduction amount of the asset and reduction amount of the
leasing liability is placed in the cash flow as a special flow. The reference relationships CE3
(Positive Liability Difference) or CE4 (Negative Payables Difference) are used.
This calculation is followed by a valuation similar to valuation procedure "Absolute
Difference":
Figure 129: Calculation
Lesson: Understanding valuation behavior
Figure 130: Valuation Behavior: New Start
Using the new start valuation behavior a new asset is used. The values of the existing asset
are adjusted such that the remaining value is zero. The new asset value is calculated based
on: new asset value = new present value.
The difference between the asset closing balance and leasing liability closing balance is
placed in the cash flow as a special flow using reference relationship CE3 (Positive Liability
Difference) or CE4 (Negative Payables Difference).
Figure 131: Valuation Behavior: Relative Difference
Using the Relative Difference valuation behavior the existing asset is still used. The new asset
value is calculated based on: new asset value = remaining value before new valuation x ratio
(new present value to leasing liability balance before new valuation).
The difference between the asset closing balance and leasing liability closing balance is
placed in the cash flow as a special flow (flow using reference relationship CE3 (Positive
Liability Difference) or CE4 (Negative Payables Difference).
LESSON SUMMARY
Unit 4
Learning Assessment
1. Please describe the main steps of the contract revaluation process.
2. Select the reasons for contract changes.

X Increase or decrease of contract conditions
X Contract renewals
X Changes of the probable contract end date
X Termination/notice of a lease contract.
3. Please describe the influence of contract termination and renewal to the revaluation
process.
4. Please describe a scope reduction for a lease contract and its influence to the revaluation
process?
Unit 4
1. Please describe the main steps of the contract revaluation process.
- of the liabilities the amounts of
2. Select the reasons for contract changes.

X Increase or decrease of contract conditions
X Contract renewals
X Changes of the probable contract end date
X Termination/notice of a lease contract.
3. Please describe the influence of contract termination and renewal to the revaluation
process.
-of-Use
-of-
result of the initial valuation. Contract renewal: when a contract is renewed a revaluation is
-of-
Use because of future lease rates.
4. Please describe a scope reduction for a lease contract and its influence to the revaluation
process?
the real value of the
Afterwards
UNIT 5 Transition scenarios
Lesson 1
Understanding transition scenarios 102
Lesson 2
Explain transition scenarios and their influence to the valuation process 104
UNIT OBJECTIVES
● Describe possible transition scenarios
● Explain the transition scenarios and the valuation process
Unit 5
Lesson 1
Understanding transition scenarios
LESSON OBJECTIVES
Transition Scenarios
Figure 133: Transition
The Leasing Solution supports multiple transition scenarios, including:

● The simplified transition scenario allows to set the date of consideration to a desired date
of adoption.
● The modified transition scenario involves the use of an Asset Default Value which the
system includes into the Valuation Result.
Lesson: Understanding transition scenarios
● The retrospective transition scenario allows to use different interest rates.

● It is also possible to set up comparison periods where the system calculates the RoU to an
earlier due date than the actual adoption of the new Lease Accounting Standards.
LESSON SUMMARY
Unit 5
Lesson 2
Explain transition scenarios and their influence
to the valuation process
LESSON OBJECTIVES
Transition and Valuation Process
Transition: Date of First Posting
Figure 134: 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.
Lesson: Explain transition scenarios and their influence to the valuation process
Transition: Date of Consideration
Figure 135: 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 136: 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.
Unit 5: Transition scenarios
Transition: Asset Default Value (II)
Figure 137: 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.
LESSON SUMMARY
Unit 5
Learning Assessment
1. Please explain the available transition scenarios for lease contracts and the valuation
process.
2. Please describe the function of the date of first posting and of the date of consideration.
3. Please describe function and postings for the asset default value.
Unit 5
1. Please explain the available transition scenarios for lease contracts and the valuation
process.
to set the date of consideration to a desired date of
2. Please describe the function of the date of first posting and of the date of consideration.
When be
valuation cash flows will be
3. Please describe function and postings for the asset default value.
between the calculated -of-
UNIT 6 System Setup
Lesson 1
Performing main customizing tasks 110
Lesson 2
Maintain settings for valuation process 120
Lesson 3
Maintaining settings for account determination 125
UNIT OBJECTIVES
● Describe main customizing tasks for leasing solution
● Explain necessary settings for valuation process
● Perform settings for account determination
Unit 6
Lesson 1
Performing main customizing tasks
LESSON OBJECTIVES
Customizing Overview
Figure 139: Balance Sheet Valuation: Overview
To use the functions for the balance sheet valuation according to IFRS, US GAAP, and so on,
the subfunction CE01 (Contract Valuation) must be activated.
Different settings for the valuation process have to be defined (for example, valuation
principles, valuation rules, account determination, and so on).
Lesson: Performing main customizing tasks
Valuation-relevant control settings must be defined per company code and contract type, as
well as filed settings for relevant contract types. As for the valuation-relevant data additional
authorization objects (F_RECE_*) are existing, these authorization objects must be
considered.
Further settings for financial accounting, controlling, and asset accounting are necessary.
Figure 140: Integration between SAP Real Estate Management and SAP FI-AA
Users have the option to define which asset classes are used for the automatic asset creation
from the valuation rule.
Settings can be made company code wide. It is also possible to use differentiation criteria to
determine the asset class.
Figure 141: Control Settings for Contract Valuation
The contract valuation has to be enabled for each relevant company code.
If in the controlling settings customizing table only a company code is defined, the valuation
functionality is enabled for every contract type for the specific company code. If the valuation
functionality should only be enabled for selected contract types only, these contract types
have to be specified in the customizing settings.
In addition, it is possible to assign a reference interest rate which is used during the
assignment of the valuation rule to a lease contract.
Unit 6: System Setup
Figure 142: Valuation Relevance
It is possible to define valuation relevance in customizing. The available values can be freely
defined in the customer system.
The following are examples for possible settings:
● Relevant or not relevant for valuation
● Low Value Leases
● Short term leases
Per value it can be defined whether this entry is relevant or not relevant for the valuation
process. If this “not relevant” indicator is active for an entry, it is not possible to maintain
valuation-specific data for contracts with this valuation relevance value (if a contract has been
flagged as not relevant for valuation, the tabs valuation parameters and valuation are hidden
in the contract management).
This classification is used for reporting options in regards to disclosure requirements.
The associated conditions are linearized over the contract term (for example, FASB 13).
● Balance-sheet capitalization
Balance-sheet capitalization is used (for example, IFRS or US-GAAP).
Figure 145: Valuation properties
Condition Valuation Groups determine how the assigned condition is handled during the
contract valuation process.
The following are possible valuation properties:
● A = Lease Installment (A)
These conditions are included in the calculation of the present value.
● B = Initial Costs
The amounts of the related one-time conditions (irrespective of their validity) form, in
total, the initial costs that increase the asset value initially. It must be noted here that all
initial costs must have either the “One-Time Statistical Posting” condition purpose or the
“One-Time Posting” purpose. For the initial costs, a valuation cash flow item is generated
according to the purpose, which transfer posts the costs for specific accounting principles.
● C = Present Value Specified
Such conditions specify the present value (leasing liability or leasing receivable).
● F = Net Worth Value Specified
Such conditions specify the net worth value.
● G = Depreciation
Such conditions define (irrespective of their validity) extraordinary depreciation or write-
up (depending on the flow type for the condition) at the start of consideration.
● D = Cash Surrender Value
Such conditions define (irrespective of their validity) the cash surrender value at the end of
the term.
● E = Remaining value guarantee
Such conditions define (irrespective of their validity) the remaining value guarantee at the
end of the term.
● R = Asset Retirement Obligation
Such conditions define (irrespective of their validity) the obligations that are to be applied
for a retirement and increase the net worth value.
● S = Penalty Payment
Such conditions define (irrespective of their validity) penalty payments at the end of the
term (for example, due to early notice).
● I = Incentive
Incentives are initial payments occurring during the conclusion of vendor contracts and
decreasing the value of the asset at the time of capitalization. Incentives must have a one-
time-posting condition purpose (either "One-Time Statistical Posting" or "One-Time
Posting"). For incentives valuation cash flow items are generated for specific accounting
principles.
● V = Subletting
These conditions define changes to the net worth value due to subletting at the start of
consideration. The flow type of the condition defines whether the process is an acquisition
or a retirement.
● U = Transfer Posting or Linearization
Such conditions are transfer posted or linearized (see Linearization Type).
● X = Miscellaneous
These are conditions that are not used in the valuation (see Condition Consideration = N).
Figure 146: Condition Consideration
Condition Consideration determines how a related condition flows into the valuation
proportionately in combination with its condition valuation property, as follows:
● F = Full Consideration
100% of the condition is used in the valuation. The Percentage Share of Condition and
Absolute Share of Condition fields are not ready for input.
● N = Do Not Consider
The condition is not used in the valuation. The Percentage Share of Condition and Absolute
Share of Condition fields are not ready for input.
This is related, for example, to advance payment conditions for service charges. Such
conditions are posted for all accounting principles by means of the partner and object cash
flow.
● R = Transfer Posting or Linearization
The condition is not used in the valuation. The Percentage Share of Condition and Absolute
Share of Condition fields are not ready for input.
This is related, for example, to service charges that are transfer posted or linearized for
specific accounting principles.
● O = As Specified
The Percentage Share of Condition and Absolute Share of Condition fields are ready for
input.
The following values can be used to combine condition valuation properties and condition
consideration:
Figure 147: Condition Valuation Property and Condition Consideration
From the point of view of Financial Accounting the following approaches and functionalities
are available:
● SAP S/4HANA Finance
● New GL Ledger Approach
● New GL Account Approach
● Classic GL.
On the other hand side there are different approaches within asset accounting:
● New Asset Accounting
● Classic asset accounting with new depreciation calculation
● Classic asset accounting with old depreciation calculation.
Furthermore ther is the possibility to use direct posting functions without integration to the
asset accounting component.
In the figure the available approaches considering Financial Accounting and Asset Accounting
are described.
Figure 148: Condition Valuation Group
Contract conditions are considered in the balance sheet valuation process in different ways.
Condition types have to be assigned to the defined condition valuations groups (for example,
for IFRS, US-GAAP).
The following information is necessary for the assignment of condition types to condition
valuation groups as well:
● External condition purpose (for example, actual or statistical rent)
● Valuation property
● Consideration of the condition during the valuation process
Figure 149: Valuation Rule (I)
Valuation rules include different attributes, such as the following:

● Accounting principle (for example, IFRS, US GAAP, HGB)
● Valuation type or transfer posting, linearization, balance-sheet capitalization)
● Condition valuation groups (described in the previous figure).
These settings, together with the assignment of valuation-relevant company codes and
valuation-relevant contract, are the basis for the assignment of valuation rules to lease
contracts and for the valuation process.
Figure 150: Valuation Rule (II)
Rental and lease contracts can be valuated according to different accounting principles. The
accounting principles contain different rules regarding the way contracts are represented in
accounting, and how the various contract conditions (periodic payments, one-time payments,
service costs) are included in the valuation. Multiple valuation rules are possible for each
accounting principle. The valuation rules determine how the valuation for the respective
accounting principle is calculated and to which ledgers or accounts the postings are made.
They allow you to do the following:
● Define how you want to model your valuation rules.

● Specify for which contract types the valuation rules are relevant.
● Define the company code in which valuation rules are to be applied.
Possible integration of ledger solution or account solution. If ledger solution is active the
corresponding accounting principle can be assigned.
SAP Real Estate Management supports the following three Valuation Types:
● Linearization
● Transfer Posting
● Balance-Sheet Capitalization
It is possible to customize the valuation rule so the rule status is automatically set to
complete. It is also possible to automatically perform the contract valuation when assigning
the valuation rule.
SAP Real Estate Management supports the following two Integration Types:
● Asset Accounting
● Direct Balance-Sheet-Posting
LESSON SUMMARY
Unit 6
Lesson 2
Maintain settings for valuation process
LESSON OBJECTIVES
Settings for Valuation Process
Figure 151: Customizing Settings for the Valuation Process
The path from valuation rule to the corresponding G/L accounts in customizing consists of
the following different levels:
● Each Valuation Rule (accounting principle) has its own Condition Valuation Group.
● The Condition Valuation Groups contains the Condition Types that have been defined in
Customizing and assigned to the Condition Valuation Group.
● Condition Types in SAP Real Estate Management contain an assigned Flow Type. Besides
Flow Types there are Reference Flow Types which handle changes such as rent increases
or decreases.
● Through the specified Account Determination the system determines in which G/L
Accounts postings are made based on the corresponding Flow Type.
Lesson: Maintain settings for valuation process
Figure 152: Leased Building Example
Figure 153: Valuation Postings (All Ledgers)
Figure 154: Account Determination for Periodic Postings (I)
The definition of condition types in SAP Real Estate Management includes a flow type per
condition type. This flow type represents the basis for the account determination via account
symbols.
As a first step account symbols for both debit and credit postings are assigned to the flow
type. In a second step these account symbols are replaced by accounts (depending on the
used account sheet).
Figure 155: Account Determination for Periodic Postings (II)
In some cases the account determination depends not only from the flow type of the
condition, but also from so-called reference flow types. For relationships such as distribution
postings (object transfer), a reference flow type is defined.
If a reference flow type is assigned, the account determination is defined not by the original
flow type, but by the defined reference flow type.
Lesson: Maintain settings for valuation process
Figure 156: Relationships for Reference Flow Types
The following most important relationships are relevant for balance sheet valuation purposes:
● CE1 Posted Initial Costs
● CE2 Statistical Initial Costs
● CE3 Positive Liability Difference
● CE4 Negative Payables Difference
● CE5 Negative Linearization
● CE6 Direct Balance Sheet Posting
● CE7 Asset Retirement Obligation
● CE8 Extraordinary Amortization
● CE9 Extraordinary Writeup
● CEA Positive Initial Liability Difference
● CEB Negative Initial Liability Difference.
● CEC Incentives
● CED Statistical Incentives
● CEE Accrual/Deferral Adjustment
● CEF Accrual/Deferral Adjustment
● CEG Due to End of Subletting
● CEH Due to Start of Subletting
● CEI Transfer Posting Due to Retroactive Change
● CEJ Transfer Posting Due to Retroactive Change
● CEK Clearing of Asset Transaction
Figure 157: Valuation Postings HGB (German GAAP)
LESSON SUMMARY
Unit 6
Lesson 3
Maintaining settings for account
determination
LESSON OBJECTIVES
Settings for Account Determination
Settings for Account Determination
Figure 158: Account determination settings
Using account determination values is necessary for valuation postings relevant for lasing
liabilities as described in SAP note 2430436 (RE-F: Leasing – corrections and function
enhancements). This is to enable an object-specific differentiation of the account
determination within a valuation rule.
The customizing activity “Valuation Object-Dependent Control Parameters” (former known
as “Asset Classes for Object Types”) therefore was enhanced with the account determination
value.
As the account determination value is mandatory, a missing account determination value in
the customizing setting will lead to error message RECERA 005 (“No account determination
value is defined for object &1”). This error message can be avoided using a BAdI
implementation for BAdI BADI_RECE_EVALUATION (method

GET_ACCOUNT_DETERMINATION_KEY).
For transfer postings (valuation postings with the valuation type "Transfer Posting“), the
account determination value is derived from the relevant condition and the corresponding
posting term. An initial account determination value is possible in this case.
Regarding asset transactions a clearing account (asset clearing) is used as described in SAP
note 2426171 (Leasing: New posting logic for asset transactions via clearing account) can be
used. The posting document is not longer created directly from the asset to the payable, but
indirectly using the asset clearing account. If SAP note 2426171 is implemented the account
determination for the new posting logic has to be changed accordingly before any valuation
postings are executed. This affects flow types, account symbols, account determination
values, and the assignment of the accounts.
Figure 159: Account Determination for Distribution Postings
Figure 160: Reference Flow Types Distribution Postings
Lesson: Maintaining settings for account determination
For the HGB valuation rule it is necessary to define a reference flow type with relationship 030
(distribution posting/transfer posting) for each flow type of all relevant condition types. In
addition flow types for follow-up postings (010 (Follow Up Postings due to Condition Increase)
and 020 (Follow Up Postings due to Condition Decrease)) and reference flow types for the
transfer postings (030) for the reference flow types are necessary too.
Figure 161: Valuation Postings HGB, IFRS
Figure 162: Customizing Account Approach
There are some slight differences in Customizing when using the Account Approach
compared to the Ledger solution.
First of all, the field Accounting Principle in the Valuation Rule is left empty because there is
no direct link to the Ledgers when using the Account Approach.
To differentiate between multiple accounting principles (e.g. IFRS, US GAAP, HGB) you have
to set up different accounts (e.g. IFRS: Clearing and HGB: Clearing).
In order to post to multiple accounts it is required to use different sets of Flow Types or
different Account Determination Values.
For the correct posting to the Asset it is required to specify which Valuation Rule posts to
which Depreciation Area of the Asset. This is defined in the Customizing of the Valuation Rule.
Figure 163: Account Determination IFRS: Valuation Rule
For the IFRS and US GAAP valuation process the following flow types (including account
determination) are necessary:
● Flow Type Acquisition (flow type which is transferred to the cash flow for asset
transactions (acquisitions and retirements); accounts to be used for a posting are then
derived from this.
● Flow Type Depreciation (flow type transferred to the cash flow for depreciation
transactions (depreciation and write-up); accounts to be used for a posting are then
derived from this. Reference flow types must be defined for delta changes)
● Payment Flow Type (flow type is applied to the cash flow for payment flows; accounts to
be used for a posting are then derived from this)
● Flow Type Interest (flow type is transferred to the cash flow for interest transactions;
accounts to be used for a posting are then derived from this)
In all of the cases mentioned here, reference flow types must be defined for delta changes.
Figure 164: Account Determination IFRS: Acquisition Asset
The acquisitions defined in the valuation rule are used for the cash flow calculation for asset
transactions (acquisitions and retirements). As a next customizing step, asset transaction
types have to be assigned followed by the account determination for fixed asset accounting.
Figure 165: Reference Flow Types for Acquisition
The account determination for the acquisition flow types includes the following steps:
Starting with the flow type ”Acquisition" of the valuation rule the follow-up reference flow
types (for reference relationship 010 (Follow Up Postings due to Condition Increase) and 020
(Follow Up Postings due to Condition Decrease)) have to be defined.
Flow types for contract modifications (CE3 (Positive Liability Difference), CE4 (Negative
Payables Difference)), for extraordinary depreciation and writeup (CE8 (Extraordinary
Amortization), CE9 (Extraordinary Writeup) have to be defined.
Only in case that the customer does not want to post on fixed asset accounts but directly on
balance sheet accounts, reference flow types with relationship CE6 (Direct Balance Sheet
Posting) must be defined.
Figure 166: Account Determination IFRS: Depreciation Fixed Asset
The flow types related to depreciation of fixed assets are not used for postings within SAP
Real Estate Management. These flow types are only used to define the cash flow items for the
valuation cash flow of lease contracts.
The definition of account determination settings for the depreciation of fixed assets belongs
to the customizing settings of SAP FI-AA.
Figure 167: Reference Flow Types for Depreciation Asset
The flow type “Depreciation" from the valuation rule is used only for the cash flow generation -
no need to define account symbols, because the posting of depreciation is done with the FI-
AA depreciation run. The account determination has to be done in customizing of FI-AA.
Nevertheless it is necessary to define reference flow types for follow-up postings for the cash
flow generation (valuation cash flow).
Just in case, that you do not use fixed asset accounts but the direct balance sheet posting,
the depreciation posting will be done by valuation posting run. In this case you need to define
reference flow types for relation CE6 (Direct Balance Sheet Posting) for all these flow types
with the respective account determination. The flow types from the cash flow will be switched
to the CE6 (Direct Balance Sheet Posting) reference flow types during posting run.
Reference flow types for reference relationship 010 (Follow Up Postings due to Condition
Increase) and 020 (Follow Up Postings due to Condition Decrease) are necessary as well.
Figure 168: Account Determination IFRS: Payment
In the valuation rule (IFRS, US GAAP) a flow type for payments is defined. To define the
account determination for this flow type, the following steps are necessary:
● Definition of account symbols for debit and credit postings for the payment flow type
● Replacement of the account symbols with accounts (per account sheet).
Figure 169: Reference Flow Types for Payment
For the payment flow type related to a valuation rule the following reference flow types have
to be defined:
● Reference flow types for follow-up flow types for reference relationship 010 (Follow Up
Postings due to Condition Increase) and 020 (Follow Up Postings due to Condition
Decrease))
● Reference flow types for initial costs CE1 (Posted Initial Costs) and CE2 (Statistical Initial
Costs)
● Reference flow types for liability differences (CE3 (Positive Liability Difference) and CE4
(Negative Payables Difference))
● Reference flow types asset retirement obligations (CE7 (Asset Retirement Obligation))
and initial liability differences (transition phase, posting of the difference between RoU
amount and liability).
Figure 170: Account Determination IFRS: Interests
In the valuation rule (IFRS, US GAAP) a flow type for interest is defined. To define the account
determination for this flow type the following steps are necessary:
● Definition of account symbols for debit and credit postings for the payment flow type
● Replacement of the account symbols with accounts (per account sheet).
Figure 171: Reference Flow Types for Interests
For the interests posting reference flow types for follow-up flow types for reference
relationship 010 (Follow Up Postings due to Condition Increase) and 020 (Follow Up Postings
due to Condition Decrease)) must be defined.
Figure 172: Account Determination IFRS: Linearization
The flow type Linearization is used for the linear distribution of non-lease components like
service costs (represented by separate conditions or as part of lease conditions).
Figure 173: Reference Flow Types Linearization
Related to the linearization flow type of the valuation rule reference flow types for the
following reference relationships must be defined:
● Reference flow types For the interests posting reference flow types for follow-up flow
types for reference relationship 010 (Follow Up Postings due to Condition Increase) and
020 (Follow Up Postings due to Condition Decrease))
● In the special case where negative conditions are used that are not credit postings for
other conditions, in addition reference flow type for CE5 (Linearization decrease) and the
respective follow-up reference flow types for reference relationship 010 (Follow Up
Postings due to Condition Increase) and 020 (Follow Up Postings due to Condition
Decrease))
LESSON SUMMARY
Unit 6
Learning Assessment
1. Please select the most important customizing settings for lease contracts
X Control settings for company codes and lease contracts
X Screen sequence settings for valuation-relevant contract types
X Definition of valuation rules
X Assignment of possible object types to valuation-relevant contract types
X Definition of condition types and condition groups for valuation-relevant contract

account determination
2. Please name the most important customizing settings for the valuation process.
X Definition of condition valuation groups
X Definition of condition type and assigned flow types
X Valuation relevance settings
X Account determination for valuation postings.
3. Please describe the purpose of valuation types and valuation properties
4. Please explain the main steps of the account determination process for contract
valuation.
Unit 6: Learning Assessment
5. Please explain the main customizing settings regarding integration topics.
Unit 6
1. Please select the most important customizing settings for lease contracts
X Control settings for company codes and lease contracts
X Screen sequence settings for valuation-relevant contract types
X Assignment of possible object types to valuation-relevant contract types
X Definition of condition types and condition groups for valuation-relevant contract

account determination
2. Please name the most important customizing settings for the valuation process.
X Definition of condition valuation groups
X Definition of condition type and assigned flow types
X Valuation relevance settings
X Account determination for valuation postings.
3. Please describe the purpose of valuation types and valuation properties
are linearized over the contract

- -
IFRS or US-
4. Please explain the main steps of the account determination process for contract
valuation.
of different levels:
flow
5. Please explain the main customizing settings regarding integration topics.
assets linked to the contract can be seen in the “ ” section of the
-of-Use assets.

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1 Unit 1: IFRS 16 and US GAAP ASC 842: overview

2 Lesson: Understanding IFRS and US-GAAP regulations

15 Unit 2: SAP Lease Contract Management

16 Lesson: Understanding SAP Lease Contract Management

38 Unit 3: Contract valuation and posting

39 Lesson: Explaining valuation data and contract conditions

83 Unit 4: Change Management

84 Lesson: Performing contract condition changes

101 Unit 5: Transition scenarios

102 Lesson: Understanding transition scenarios

109 Unit 6: System Setup

110 Lesson: Performing main customizing tasks

© Copyright. All rights reserved. v

1 Unit 1: IFRS 16 and US GAAP ASC 842: overview

2 Lesson: Understanding IFRS and US-GAAP regulations

15 Unit 2: SAP Lease Contract Management

16 Lesson: Understanding SAP Lease Contract Management

38 Unit 3: Contract valuation and posting

39 Lesson: Explaining valuation data and contract conditions

83 Unit 4: Change Management

84 Lesson: Performing contract condition changes

101 Unit 5: Transition scenarios

102 Lesson: Understanding transition scenarios

109 Unit 6: System Setup

110 Lesson: Performing main customizing tasks

© Copyright. All rights reserved. v

© Copyright. All rights reserved. vi

UNIT 1 IFRS 16 and US GAAP

● Describe new accounting standards in IFRS 16 and US GAAP ASC842

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New Accounting Standards in IFRS and US GAAP

Figure 2: Motivation to Replace IAS 17

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Lesson: Understanding IFRS and US-GAAP regulations

Figure 3: The IFRS16 Leases Standard Quick Overview

Figure 4: IFRS16 and US GAAP ASC842

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Unit 1: IFRS 16 and US GAAP ASC 842: overview

Figure 5: IFRS: Finance Lease and Operating Lease

Figure 6: IFRS 16 - The New Accounting Standard for Leases

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Lesson: Understanding IFRS and US-GAAP regulations

Effects of The New Accounting Standards

Figure 7: Effect analysis by IASB

Figure 8: Further Information Material

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Unit 1: IFRS 16 and US GAAP ASC 842: overview

For additional information material, refer to the following:

Figure 9: IFRS Leasing Example: Leased Building for 3 Years

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Lesson: Understanding IFRS and US-GAAP regulations

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