Lease Administration – the Total Obligation Amount Is Different Than the Cost of the Asset Associated With the Lease (Doc ID 2629934.1)

Last updated on JUNE 17, 2022

Applies to:

Goal

After acquiring a business, the total obligation amount is different than the cost of the asset associated with the lease. Is this business requirement supported by PeopleSoft Lease Administration?

Business Case:

The business acquires another business. During purchase price accounting, the GAAP guidance, specifically ASC 805 (business combinations), is to value all assets using a 3rd party valuation company. That company places a value of $50,000 on a piece of equipment that is leased. The total lease payments remaining on the lease are $75,000. In this case, the GAAP guidance results in an obligation greater than the asset value. 

Please note that the remaining payments (i.e. obligation) could be less than the asset value.

Solution

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