New lease accounting standards are beginning in 2019 and require companies to record the value of all leases with terms of more than 12 months on their balance sheets. The goal is to increase transparency and global consistency. Collection of this lease information can be challenging as leases are currently hidden throughout many departments, locations and disparate financial applications. For large companies this means sorting through and extracting relevant information from thousands of leases and pieces of paper not currently in any systems or in many cases, in different languages across multiple countries.
The new rules are requiring more effort than expected, and impacting many company processes in budgeting, reporting, procurement, IT and daily operations, and managing and educating the financial impact. Full FASB (ASC 842) and IASB (IFRS 16) lease accounting standards
Think this is just financial reporting? Think again.
From strategy and governance to lease inventory through LeaseCaptureSM – We’re here to help.
Contact Us today!
PREPARATION & DATA EXTRACTION
1. Experienced program management is critical to a successful transition. Assuming success is defined as meeting quality compliance in the most efficient and least cost and time-consuming manner.
2. Centralized lease capture can dramatically speed the collection process– especially for large companies with company-wide lease distribution.
3. Use appropriate tools given the quantity of leases you have – more than 100 leases likely put companies into tools like LeaseCaptureSM and formal lease management software.
CHANGE MANAGEMENT & KEY DECISIONS
4. Change management is key for becoming compliane in the most efficient manner.
5. Make Practical Expedient decisions early – to maximize the data collection efforts and minimize rework.
6. Payment Calculations can be complex and difficult – set your standards early and communicate often to the team that is making these calculations.
VENDORS & VALUE – NEW!
7. Lease Management software is suddenly changing fast! – as vendors are also reacting to the new requirements and new market needs.
8. Continually look for business value opportunities during the compliance efforts – there are many!
9. CFO feedback on the compliance efforts – has been pretty brutal on two fronts: the cost and the effort required for compliance given the proposed business benefits and questioning why the FASB has gone down this path to begin with.
Do you know your company-wide number of leases? Do you know where they are located?
Do you know the new FASB financial compliance requirements?
Do you have a company-wide plan to identify all assets, collect all leases and extract all data?
Have you defined your new lease accountability processes? Procurement and lease evaluation?
Have you established a dedicated, centralized resource team? Set capture and operational standards?
Do you have lease capture tools that integrate with your accounting software?
Do you have a financial plan for reporting impact and financial gains or losses?
Do you have a clear understanding of needs to define an RFP and vendor selection process for Lease Management software?
Do you know your non-compliance risk mitigation?
Do you have the knowledge and experience on your staff to support this large effort?
Companies financial performance: EBITA, profits, assets and liabilities.
Company performance measures and executive compensation?
Share price and market capitalizations? Credit ratings? Bank/Loan covenants?
Strategic opportunities to improve financial performance?