By Jim Wong, CPA | June 10, 2015


Is your business prepared for the new lease accounting standards? Based on the FASB and IASB’s 2013 proposal to improve the quality and transparency of financial reporting, it’s only a matter of time before organizations will be required to include leased assets on their balance sheets. And the change could bring major upheaval to a lot of organizations — especially those that don’t start preparing now.

Most accounting and finance leaders / managers agree that new or upgraded lease accounting software is critical to prepare for the new standards, which will go into effect no sooner than January 2017. But according to a CFO.com white paper, more than 90 percent of companies say they’re not prepared, and more than 60 percent say they’ll need to upgrade or purchase new IT systems to comply!

So what can you do to get ready? For starters, research options that cover all of your assets — equipment, real estate, information technology and infrastructure. CFO.com also recommends a solution that delivers both process management and business analytics using a single technology platform.

In addition, they offer advice on choosing an effective lease accounting solution by addressing seven key areas, which I’ve summarized below.

1. Lease abstraction, inventory and analysis
Today’s traditional accounting systems don’t necessarily cover all the bases when it comes to leases — that is, there are a lot of gaps to be filled. Because the new standards will require complete information on a variety of leases, finding a solution that allows for a complete picture of each lease and makes inventory control and data analysis easy is essential to future success. Being able to drill down to the fine details of each lease agreement will make meeting the standards much simpler — so you should factor this in when deciding on a lease accounting solution.

2. Lease administration and management
How are you managing your leases today? If you’re keeping records in a spreadsheet, it’s time to upgrade. Not only is this manual and time-consuming; it’s fraught with risk and inefficiencies. Because the new lease accounting standards require more transparency (which equates to details), you’ll need a solution that can automate your lease administration and management, and makes these often complex takes more efficient and effective. Look for a system that provides end-user dashboard configuration, automates alerts such as lease expirations and approval flows, and provides both out-of-the-box and ad hoc reporting.

3. Lease accounting and compliance
As I mentioned, the new standards will add a bit of complexity to organizations’ lease accounting procedures and record keeping, with periodic operational reviews and mandatory reporting requirements. To make reporting and auditing simpler for your business, it’s important to implement a solution that streamlines, simplifies and automates your accounting process and procedures across all lease types. In addition to the above, an ideal solution will include bulk process updates, audit tracking and easy integration with existing accounting systems.

4. Security and audit compliance
Just a bit more about auditing here — because if your organization is going to go through the tedious process of updating your system, you want to ensure it’s going to reduce complexity and make auditing easier. Your solution should please both auditors and internal employees. Really, it should meet the new standards for system and information security while also providing user- and/or role-based settings, complete with version control tracking capabilities.

5. Transaction management
Again, automation is key when it comes to managing your leases from contract negotiation to expiration. Making the process simple for every user means today’s manual processes will be much more streamlined. From approval routing to automatic lease creation, look for a solution that provides end-to-end transaction management for all lease types, whether they’re simple or more complex.

6. Strategic facility planning
According to an IBM and CFO Research study, real estate assets are expected to generate the greatest impact on the balance sheets of companies once the new lease accounting standards are in place; almost 50 percent of companies surveyed indicated their leased real estate assets may add more than 10 percent to their balance sheets. While it’s a good idea to start streamlining and getting resources under control now, it will become even more critical under the new standard. Consider solutions that offer facility planning modeling and analysis, as well as those that simplify the process and fill any existing gaps.

7. Management system architecture
With the fairly aggressive timeline for the new lease accounting standard, it’s important to get ahead of the curve by upgrading or purchasing new systems before it’s too late. Even more so, be sure to find a solution that is easy to implement, integrates seamlessly with existing software and utilizes one technology platform and data repository. Web-based platforms require little set-up time, tend to be more user friendly, can handle thousands of concurrent users, and are designed to work with a variety of today’s systems.

It should be noted that even leases negotiated prior to the implementation date of the new standards will likely fall under the new rules, so taking the time to evaluate needs and implement a new solution now will go a long way and help to mitigate some risk in the future.

Have any questions regarding the right solution for lease accounting? Send an email to one of our Brilliant™ experts at info@brilliantfs.com or comment below!


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