Real estate lease accounting: Visual Lease makes the complex simple
While many companies have fewer real estate leases to account for than equipment leases, real estate leases can have a bigger impact on the balance sheet. Not only are they proportionally more important, but real estate lease accounting can be vastly more complex than accounting for equipment and other types of leased assets. That fact is compounded by the new FASB and IFRS lease accounting rules.
Visual Lease has 20 years of experience with commercial real estate accounting and administration so we fully understand all these complexities. Our real estate accounting software centralizes all the essential data points and builds in tools that make it easy for you to manage and automate them on your balance sheet.
Top 9 reasons real estate lease accounting needs expert treatment
- Real estate leases have more financial entry streams associated with them.
- There are many more data points to track and keep up to date in a real estate lease.
- Real estate leases have more source documentation, making data abstraction more difficult (especially for those in multiple languages and currencies).
- Some data points are variable, such as percentage rents, CPI rent increases, CAM and other operating expenses.
- Some values require assistance from outside data sources, such as Fair Market Value and Residual Value.
- Real estate leases include more discounts and options that impact the accounting.
- There are more unique types of real estate financing, including sale leaseback and lessor/sublease accounting, that require different accounting treatments.
- Real estate leases are constantly changing and require re-measurement and accounting updates.
- During the period of transition to the new FASB and IFRS lease accounting standards, you must produce real estate lease accounting for both ASC 840 and ASC 842, and/or IAS 17 and IFRS 16. Because equipment leases were not previously on the balance sheet, they only need to the accounted for according to the new standards.
Why integrate real estate lease accounting and administration?
Real estate leases can include as many as 200 data points, and many of them are revised throughout the term of the lease. That’s why real estate lease accounting is faster and more accurate when you have a single data source that’s used for both accounting and administration of real estate leases. There’s no waiting for data updates or mistakes when admin changes aren’t transferred to accounting. In Visual Lease, as soon as legal and financial terms change, the accounting journal entries can be automated. No communication or additional work is needed.
Trust the experts in accounting for real estate
When it comes to real estate lease accounting, there’s too much at stake to take a chance on a system that’s not backed by real estate experts. You need to ensure that every data point and calculation is accounted for, correctly calculated, and sent to your accounting system in the form of journal entries along with the required disclosures. Visual Lease is designed to manage every type of real estate lease accounting complexity, AND makes it easy to drill down into the records to demonstrate the evidence in an audit.
Ready to see for yourself?