At RECONNECT 19, Community Health Network presented how they successfully transitioned to new lease accounting standards.
About Community Health Network
Community Health Network, located in Indianapolis, Indiana, is made up of 200+ sites of care, nine acute and specialty care hospitals, 20 walk-in clinic locations, and 11 surgery and endoscopy centers. The physician network consists of 1,000 providers. Community Health Network sees roughly 148,000 patients from 2,500 employers. There are roughly 770,000 student visits at over 100 schools, and the community foundations distribute over $6 million – including over $300,000 to more than 1,200 cancer patients.
The mission of the Community Health Network is to remain deeply committed to the communities they serve while enhancing health and well-being. They aim to simply deliver an exceptional experience to every life that they touch. The values of Community Health Network include:
- Putting patients first: Making patient needs and the needs of their families the number one priority
- Relationships: Remain inclusive and work together as partners and teams
- Integrity: Expect truth-telling and transparency
- Innovation: Foster creativity and openness to new ideas
- Dedication: Serve as accountable stewards of the resources entrusted to you
- Excellence: Provide access to a high quality and safe environment of care that is known for high performance
Community Health Network’s PeopleSoft Footprint
Community Health Network currently runs PeopleSoft FSCM 9.2 PI 27 and PeopleSoft HCM 9.2 PI 28 – both on PeopleTools 8.55. They plan to upgrade FSCM to PI 31 and PeopleTools 8.57 this year, and they plan to upgrade HCM to the latest PUM and PeopleTools 8.57 in 2020.
Community Health Network implemented PeopleSoft Lease Administration 9.2 in 2016. It was determined in 2018 that the new ASC 842 accounting standards change for payables/lessee leases would impact Community Health Network in 2019, so a project plan was created to implement new ASC 842 accounting standards within PeopleSoft Lease Administration.
The Transition to New Lease Accounting Standards
The mission statement of ASC 842 includes updating the current PeopleSoft Lease Administration and Asset Management configuration to comply with the new ASC 842 and IFRS 16 accounting and financial reporting standards. The high-level scope of the project includes:
- Impact of ASC 842 needs to be analyzed and changes implemented through process, policy, and procedures
- Conversion and migration of existing property leases in PeopleSoft to new accounting standards
- Loading equipment assets and leases to PeopleSoft for operating and financial leases
The implementation of ASC842 unfolded in a five-step process:
- Step 1: Design and unit test new configurations and migration process
- Step 2: Define more configuration values and perform system testing within modules for Lease Administration and Asset Management process with 10 percent real-life data
- Step 3: Finalize configuration values and perform system and integration testing with 50 percent real-life data
- Steps 4 & 5: Finalize all configuration values and perform complete cycle with all of the lease data
The images below show the project timeline and the project team structure:
Following the system implementation process, migration and conversion processes were set to occur. Migration and conversion included:
- Transitioning existing leases in PeopleSoft to the new standards
- Cutover and go-live with new accounting standards
- Entering equipment leases in production
Results of the Transition to New Lease Accounting Standards
Types of Leases
Before the implementation of ASC 842, there were two types of leases:
- Operating: Similar to renting; no risk of ownership
- Capital: Similar to financing an asset
Operating leases were set up as a lease and payments are processed via Accounts Payable. Capital leases were set up as an asset and depreciate the asset. Payments are handled through a purchase order.
Now, after the implementation of ASC 842, there are two types of leases:
- Operating: Similar to renting; no risk of ownership
- Finance: Similar to capital leases
Most of Community Health Network leases are classified as operating leases.
The requirements for a lease include:
- An identifiable asset
- The network having the right to:
- Control the use of the asset manifested by
- Obtain substantially all of the economic benefits from the use of the asset
- Direct how and for what purpose the identified asset is used
The impact of ASC 842 is that accounting is more complex, but now PeopleSoft has the ability to handle it. The outcome includes an earlier and more thorough review of agreements, amendments, and schedules required for timely and appropriate accounting.
ASC 842 changes in PeopleSoft occur in four main areas:
- Lease Administration
- Asset Management
- General Ledger
Changes in Lease Administration include new configurations for equipment leases, new operating and finance equipment leases, and changes to data values and requirements for property leases.
Changes in Asset Management include new configurations for profile and categories, new accounting templates, and new transactions in depreciation and month-end close process.
Changes in Payables/Billing/Receivables include payments for operating and finance equipment leases and no major changes to the existing process for lease payments.
Changes to General Ledger include new accounts to handle right of use, capital and operating equipment lease accounting, changes to straight-line accounting data from Lease Administration and Asset Management, and new accounting entries from Asset Management for leases.
There were various challenges faced throughout this project.
Multiple bugs were found in PI 27, PI 28, and PI 29 for Lease Administration. These were taken to Oracle Support for a fix while Community Health Network simultaneously did its own analysis to find a workaround for the bugs.
Another challenge was simply the fact that the initial phase of this project overlapped with a PUM upgrade project. Additionally, this project turned out to require a larger effort than initially scoped.
Furthermore, new options were enabled on the lease configuration page in PeopleSoft with minimal information on those options. There were also changes that were needed in the Accounting Entry template for LEX trans type after generating the accounts using AM Accounting Template en masse.
It was also challenging that there were not many delivered reports available. There were also issues with straight-line calculations.
There were numerous lessons learned from items that Community Health Network did before the project go-live.
- Multiple waves were done incrementally to become familiarized with all the steps for the lease transition process.
- The team ran end-to-end processes from creating/transitioning a lease to running AM_DPCLOSE to validate the straight-line transactions, ROU calculations, and interest expenses.
- Transactions were validated in Lease Administration, Payables, Billing, Asset Management, and General Ledger.
- A cut-over checklist was prepared with all the steps and time it took to execute each step.
- Indexes were built for some of the processes such as AM_DPCLOSE.
- The team was familiarized with new accounting entries needed for ASC 842 process.
To learn more about how Community Health Network transitioned to new lease accounting standards, check out the additional resources attached below.
COLLABORATE 20 will take place April 19-23, 2020 at the Mandala Bay Resort and Casino in Las Vegas, Nevada! Don’t miss this chance to share inspiration, insights, and solutions with your peers, vendors, and the Oracle team! Register before March 6, 2020, to take advantage of Early Bird pricing.
Save the date for Quest Experience Week! This free, four-day event is jam-packed with digital education designed to provide both strategic insight and how-to-education for Oracle users of all levels. Each day is dedicated to a different product and begins with a keynote followed by afternoon breakout sessions. Join us November 12-15, 2019, for conference-quality education from the comfort of your desk!
- Cloud Day: November 12
- Database Day: November 13
- PeopleSoft Day: November 14
- JD Edwards Day: November 15
If you’re looking for more PeopleSoft content, join us next year at RECONNECT 20, the premier deep-dive PeopleSoft focused event of the year! The event will take place July 21-23, 2020 in St. Louis, Missouri. Keep an eye out for more information on this event!