Although private companies still have some time to adopt the new lease accounting standards, public companies have already had to meet their compliance deadlines. In doing so, these companies have learned valuable lessons that can be applied to:
- Private companies that are in the planning stages of lease accounting compliance
- Public companies that rushed to select a tool and now see they need a better, long-term solution for their lease accounting needs
What are some of the things that helped public companies be successful in implementing the new lease accounting standards? What areas could have been improved?
Below, we share some helpful advice based on the experience of public companies that have already adopted new lease accounting standards.
Challenges in Achieving Lease Accounting Compliance
What lease accounting capabilities do you need for long-term reporting and compliance?
Some public companies found out the hard way that the accounting solution they chose was missing key capabilities that they need to ensure accurate, ongoing lease financials.
For example, while some companies used a lease calculator tool to meet their initial compliance needs, they now realize it will not help them maintain compliance and do their reporting for the long term.
That’s because every time a lease changes (which is often), the pertinent information needs to be updated in the lease accounting system so that subsequent reporting will be accurate. However, a lease calculator simply does not provide the tools for updating and maintaining lease data.
Public companies that chose a software-based solution with the following capabilities are better positioned for long-term compliance and accuracy:
- A single source of truth for lease data
- Automated calculations and financial reporting, including disclosure reports
- Tools for backup and verification of calculations and lease data
What is the best way to manage a large and/or complex lease portfolio?
Any public company with multiple locations or a large lease portfolio — including equipment and real estate — quickly learned that manually searching for and reporting on those leases would be a time-consuming and inefficient process.
To save hundreds of hours in time finding and verifying lease information, select a solution that provides a central repository for recording and tracking lease data. Once your leases are entered in the system, you can easily generate the reports needed for compliance — plus use the solution for ongoing updates and to view lease details on demand.
Advice for Successful Lease Accounting Audits
How long does it take to implement lease accounting?
Time and again, public companies learned that lease accounting implementation is a complex and time-consuming project, with high stakes and stakeholders across the business.
While a lease accounting software solution can be implemented in weeks, the work required before solution implementation can take many, many months. So, it is mission-critical to invest time up front in both auditing your lease portfolio and evaluating the technology you will use for lease accounting.
For help in planning your lease accounting compliance project, use our Lease Accounting Milestone Planner.
What are some best practices to satisfy auditors?
Leases can change fast and it can be hard to stay on top of them. To provide auditors with accurate and thorough lease financials, it is recommended to have checks and balances in place. To do so, you can use a lease accounting system to provide a full audit trail of updates to your changing leases. This helps provide auditors with a clear and complete picture of your business’s finances.
Strategies for Maintaining Compliance
How do you maintain accurate lease financials beyond compliance?
Look at the new lease accounting requirements as an opportunity to get the best solution for the long term — one that will continue to meet your business needs and satisfy auditors year after year.
For example, a technology solution that provides both lease accounting and lease administration capabilities helps public companies:
- Achieve compliance and meet ongoing lease accounting requirements
- Ensure that lease data is always accurate and up to date
- Save time by making lease information searchable and available at a glance
- Control costs by staying on top of all payments and transactions
- Meet important dates for renewals, renegotiations and options
How can you account for a growing or changing lease portfolio?
With the time and cost required to implement lease accounting, it makes sense to choose a solution that does more than just help you achieve compliance. Successful public companies opted for technology that will scale to accommodate any changes that might occur in their lease portfolio and provide ongoing lease management capabilities.
A cloud-based software solution can not only automate and streamline lease accounting and reporting, but also provide tools for making changes to financials, adding documents and clauses, searching for lease clauses and editing existing leases.
The Simple But Important Lessons Learned
As the experience of public companies are shown, there are some fundamental lessons that can help you to achieve lease accounting success:
- Get started now — start planning for your lease inventory and your lease accounting technology ASAP
- Do your research — get input from across the business, and perhaps consult an accounting firm, to identify leases and reporting requirements
- Think ahead to your lease management needs beyond compliance — to get maximum ROI from your lease accounting technology
- Set yourself up for success — choose a comprehensive lease accounting and lease management technology solution, such as Visual Lease
Want to hear directly from a public company about their experience preparing for and managing ongoing lease accounting compliance? View our on-demand panel discussion.
