Blog

May 2017

Lease Accounting Workflow

Matt Craig


Introduction

The following lease accounting implementation process flow represents a potential implementation project for a company.  This narrative will provide a high-level overview that will allow an efficient workflow analysis and better content understanding.  We can assist in any or all of the following project facets including stakeholders, tools, inventory, process, value, and reporting.

 

Stakeholders

As the scope and complexity of lease accounting increases, so will the organization’s level of governance.  All potential stakeholders (internal and external) should be evaluated and if necessary involved as early as possible in the project incorporating relevant requirements and providing transparency.  Regular communication will be necessary throughout the project to keep everyone on the same page and allow the stakeholders to determine if their requirements have been integrated.  Appropriate project management will also provide significant value.

Tools

Evaluation of existing tools and processes is necessary to evaluate compliance with the new accounting rules and effective process, internal control, and reporting capabilities.  If a new tool is deemed necessary through the established governance, the selection process can leverage the requirements of the stakeholders.  The requirements can then support the corporate procurement process and the implementation timeline can be integrated into the overall project plan.

Inventory

A knowledge of the number and type of leases will be necessary to complete the requirements for potential or existing tools; however, the inventory will also need to be reviewed for the new accounting rules (hopefully in tandem with input from your external auditors).  The inventory then needs to be reviewed and integrated into the final tool, allowing for appropriate accounting and reporting.  Other contracts may also need to be reviewed for imbedded leases or other arrangements that fall within the new rule framework.

Process

If there is an existing, documented process, it should be evaluated and evolved to meet the needs of the new rules.  To the extent possible, process improvement, internal control integration, and updated documentation will be added value to the project and help offset some of the implementation costs.

Value

The new rules provide an opportunity to extract value from the implementation project.  For example, a new lease vs. buy analysis, lease aggregation, unfavorable lease terms, sale/leaseback, unutilized lease escalators or de-escalators and many other value propositions can be integrated into the overall project plan and strategy.

Reporting

The external accounting firm should be involved as appropriate throughout the process.  The technical accounting strategy and impact can be assessed on the front end to provide input regarding the organization’s requirements.  Technical questions can also be addressed throughout the inventory process, with the ultimate review as part of the annual audit.

All of the facets of the project will integrate in some way with the requirements, so an integrated approach as part of the initial project development will provide benefit throughout the entire project.

Related Resources

About Core Catalysts

Core Catalysts is a management consulting firm based in Kansas City, and we serve clients across the U.S. in various industries. Core Catalysts provides services such as process improvement, product/service commercialization, revenue enhancement, financial modeling, program/project management, software selection, enterprise risk management and business performance improvement through a team that is composed of results oriented individuals.

Authors

Greg Wallman
Senior Manager
Greg.Wallman@corecatalysts.com

Key Contacts

Jim Wadella
Managing Member
Jim.Wadella@corecatalysts.com

Greg Wallman
Senior Manager
Greg.Wallman@corecatalysts.com

Disclaimer

The information in this whitepaper is not intended to provide any technical accounting or legal advice associated with the implementation of the new lease accounting standard.

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