PeopleSoft Spotlight Series: Expense Amortization in General Ledger

A recent PeopleSoft Spotlight Series video covered Expense Amortization in General Ledger, which was introduced in PeopleSoft FSCM Image 31. The video covered:

• Expense Amortization feature overview
• Setting up Expense Amortization
• Processing Expense Amortization
• Key functionality
• Additional resources

Expense Amortization Feature Overview

Expense Amortization enables Accounts Payable users to initiate advance payments into the PeopleSoft system by entering essential amortization information. It also provides the ability to create Stage journals that can be reviewed and edited before the actual journals are created.

Once you post an amortization voucher in Accounts Payable, use the amortization schedule and accounting page to review defaults passed from AP. You can make any modifications before the amortization schedule is staged and approved. After the amortization schedule is approved, you can generate amortization journals to post. At this stage, if you cancel the amortization schedule, the status of all stage journals is changed to “Canceled” and they are not available for furth processing. However, actual journals created for the amortization schedule remain unchanged. You can regenerate staged journals and redistribute the amounts by changing parameters, which are available on the Amortization Schedule page.

Organizations are required to make payments that need to be amortized in regular installments over a period of time. Accounting departments face many challenges with this requirement because some may manually process these amortization expenses.

The Expense Amortization feature provides the ability for the Accounts Payable system to initiate the advance payment and enter amortization information to generate a schedule. The schedule is used by finance to manage the amortization process, which results in fewer manual accounting entries that are used to amortize payments made in advance. It also reduces the balance of prepaid accounts.

How to Set Up Expense Amortization

The Expense Amortization setup process includes the following steps:

• Create amortization types
• Define amortization templates
• Create summary calendars
• Define amortization journal sources
• Define amortization document types
• Link setup to ledger and business unit

Use the Amortization Type page to create amortization types based on the set ID. Use the Amortization Template page to create templates that associate chartfields with amortization types.

Quarterly and yearly summary calendars are supportive for amortization schedules. Summary calendars are associated with the appropriate ledger.

PeopleSoft has delivered a new amortization journal source called AMR and a new document type called FS-AMR Amortization Generate Journal.

If you are using document sequencing, the amortization feature requires you to identify a document type or all created journal entries.

Next, link the detailed ledgers by selecting the amortization template, amortization journal source, amortization calendar, and amortization document type on the Ledgers to a Business Unit Definition page. The quarterly and yearly calendars associated on this page are created using the Summary Calendar page.

How to Process Expense Amortization

Processing Expense Amortization includes the following steps:

• Create AP vouchers with amortization voucher style
• Enter amortization details on the Amortization tab under the voucher distribution
• Post vouchers
• Review and update amortization parameters in General Ledger
• Stage and review amortization journals
• Approve amortization schedule
• Generation amortization reconciliation report
• Cancel future amortization journals due to cancellation of service

The first step to processing an expense amortization is to create an amortization voucher with the required voucher style. Select the appropriate amortization type. After you create and save the voucher, a unique amortization ID is generated for each GL business unit. When the voucher is posted, the schedule is editable, and accounting can update the amortization parameters. You can save and post a voucher in Accounts Payable using the voucher posting batch process.

There are a few additional, important things to note:

• The VAT recovery amount is posted to a separate account
• Non-recoverable VAT amounts are charged
• The creation of amortization voucher is subjective
  • The following is currently not supported in the creation of amortization vouchers:
    • Voucher build
    • Manual creation of an adjustment voucher
    • Unposting a posted amortization voucher
• Only closure of amortization vouchers is supported

Using the Amortization Schedule page, you can view the voucher schedule and accounting details. You can validate values passed from the amortization voucher and create stage journals. Once you post the amortization voucher, you can review stage journals and approve the schedule.

Intermediate stage journals are available for review before conversion to a regular journal. When an actual journal is created, stage journals are removed.

You can create amortization journals from stage journals using the amortization journal creation process. This process can be run for one or more amortization IDs. Only stage journals that have a scheduled status of “Ready” and a journal creation date that is less than or equal to the “As Of” date are processed. Select the “Consolidate” option if you want to consolidate all of the staged journals that share a common journal creation date into a single journal and for a given General Ledger business unit.

A reconciliation report is available to track the expense recognition over time and for account reconciliation purposes. If the “Consolidation” option is used to create amortization journals, the report contains details of all consolidation amortization IDs.

When a service is canceled, you can cancel the entire amortization, and all stage journals are changed to a canceled status. These are not selected by the system for further processing. Actual journals created for the amortization schedule remain unchanged.

Key Functionality

A summary of some key functionality of Expense Amortization includes:

• Control amortization parameter
• View voucher and voucher distribution details
• Amortization status and balance

When a voucher is created and posted, the amortization schedule is ready for finance to review and manage. The schedule consists of four sections:

1. The amortization schedule and accounting information
2. Voucher details
3. Voucher chartfields
4. Amortization schedule details

The amortization schedule in the accounting section is where finance populates the appropriate amortization parameter for the prepaid vouchers. Although the parameters are pre-populated from the voucher, finance can override the information to ensure that the proper accounting principle is applied. This information is used to stage amortization journals.

The voucher detail and chartfield sections provide finance with relevant voucher information. The amount to amortize and the remaining balance is tracked on this page.

The last section – amortization schedule details – is populated based on the parameter entered by finance in the amortization schedule in the accounting section. The amortization schedule is in pending status until it is staged. When staged, the section contains the stage rows that represent the future journals to be posted. Each row is “pending” while the amortization schedule is “in progress.” The number of rows staged depends on the number of periods to amortize. Each row contains a stage ID and a journal creation date, which accounts for a particular amortization period of the prepaid voucher. When amortization is approved, the status for each row is changed to “ready.”

At this point, the amortization can be considered to be in “autopilot mode” – meaning that finance no longer needs to monitor the schedule because period and processes pick up eligible staged rows based on the creation date that is relative to the current period. Each row has either a staged ID or journal ID depending on whether the journal has been posted. When the journal is posted, the staged ID is deleted. The journal ID and journal date fields are populated, and the journal status is changed to “posted to ledger.” The row status has changed to “completed.”

During the staging process, each row is pre-edited by the system. This process performs all of the journal edits that you have in place for typical journal editing, including combo editing. If there are errors at this point, finance can correct the error and restage the entire schedule. This pre-edit process increases efficiency in managing edit errors and saves time downstream. It is important to note that, at this point, although the stage row simulates a journal, it is not an actual journal. The actual journal creation and post does not take place until the applicable accounting period is reached.

In the event of journal edit rules or track field changes that air on remaining rows when journals are already posted, finance can take corrective action individually using the “edit” action. In addition, limited access can be granted to correct the actual journals created – particularly to facilitate period close. This should be restricted to individuals with full understanding of the impact to the prepaid balances. This can be granted using the User Preferences General Ledger page.

For more information on the Expense Amortization process, refer to PeopleSoft FSCM online help. Additional information about the feature can be found in the PeopleSoft General Ledger and PeopleSoft Accounts Payable online documentation.

To learn more about Expense Amortization, check out the video below.