For public companies who must comply with FASB ASC 842 and/or IFRS 16 within a few short months, how to get ready FAST is the critical question. The fact is, if you are not well into your implementation process already, you are running a big risk of not being ready in time. Private companies have until January 1, 2020, but should be in the planning stages by now.
A shortage of internal resources is another challenge. Typically, companies do not have personnel to dedicate to FASB compliance, or the experience and technical accounting understanding to support this type of project.
For many, taking advantage of lease accounting implementation services from an expert consulting firm may be the ideal solution to both problems.
In this article, we will address how you can benefit from third-party lease accounting implementation services, the range of services available, and the value you can expect to gain from working with experts who have already helped numerous companies through this process.
Why work with an outsourced lease accounting implementation services provider?
Understanding the timeline to FASB and IFRS compliance
Every organization is going through the FASB ASC 842 lease accounting process for the first time. That is why it is so difficult to predict how long it will take to achieve compliance.
Experts providing lease accounting implementation services, on the other hand, have been through this process many times with clients in a wide range of industries and with a variety of lease portfolios. As a result, they understand the complexities and the workload extremely well, and can more accurately predict the time and effort it will take for each client to be prepared to comply with the new standard.
“The lease implementation effort is underestimated by many companies,” said Steven Sayewitz, a Manager at Riveron, focusing on lease accounting system selection and implementation, “especially when taking into account the data collection effort, policy decisions, and future workflow requirements. Because of our methodical process and experience, asking the appropriate scoping questions on the front end and performing a rigorous portfolio sampling helps to collect accurate accounting data and project a realistic timeline to compliance.”
Avoiding false starts
Part of the reason companies underestimate the timeline is because they do not know what they do not know. There is a learning curve involved in this process and a great many decisions to be made. Companies jumping into the process without the guidance of an expert often make mistakes that waste time and money. With lease accounting implementation services, you gain the advantage of experience and avoid those mistakes.
“Often companies need to pivot from work already performed after months of effort,” said Sayewitz. “By getting into the details and discussing policy decisions and approach, areas of consideration come to light which may not have been initially considered.”
“Companies can limit re-work by engaging with experts early on to help them through the initial questions and planning.”
Sharing the load
A great deal of time-consuming work is needed to get prepared for the lease accounting changes. Collecting lease data and preparing the data for your lease accounting system is probably the biggest task. However, there are additional tasks that may prove surprisingly difficult for those who are not experts, such as choosing the right lease accounting software, and developing new processes and procedures for gathering, updating and reporting on lease data post-compliance.
Consultants providing lease accounting implementation services can take some or all of those tasks off your plate, freeing up your staff to focus on other tasks and initiatives.
Preparing for day 2 (Post-implementation)
The right lease accounting implementation services partner can facilitate development of policies and procedures that not only get you ready to “flip the switch” to ASC 842, but also help you maintain compliance for years to come.
What implementation steps can you outsource?
Lease accounting implementation services can include any or all of the following steps:
Initial assessment: reviewing your complete lease portfolio and identifying everything that qualifies as a lease.
Controls and policies development: developing processes and approvals to ensure valid data, and advising on policy decisions that minimize time while mitigating risk, such as decisions about when to take practical expedients.
Project management: overseeing your lease accounting implementation process and keeping all involved parties on track for meeting the compliance deadline.
Software selection: knowing the strengths and limitations of software providers and identifying the ideal solution for your specific needs.
Gathering data: collecting lease information from decentralized sources throughout your organization.
Lease abstraction: extracting the relevant clauses from your contracts.
Data preparation and transfer: aggregating and normalizing lease data from many sources, centralizing and moving into your lease accounting database.
Testing and validation: robust accounting testing and checks and balances to make sure your reporting results accurately represent your lease portfolio.
Process development for Day 2: developing a plan for maintaining compliance, including policies and processes for ongoing collection and updating of lease records.
Cost and value of lease accounting implementation services
Given the looming deadline, escalating the timeline is enough of a reason to consider lease accounting implementation services. But, companies also want to understand the value they are getting for the expense.
Sayewitz emphasized that when you choose an experienced advisor, lease accounting implementation services can easily pay for themselves by giving time back to your internal staff.
“If internal resources are tasked with figuring out what the guidance requires, systems to adopt, and creating new processes for day 2, inevitably some productivity loss around day-to-day responsibilities will occur,” said Sayewitz.
And, there is additional ROI that comes from using lease accounting implementation services that most organizations overlook. It creates the basis for accurate financial reporting, and helps develop streamlined processes, enabling those responsible for accounting of leases to focus more on the financial impact and opportunities for lease spend cost savings.
In next week’s blog post, we will continue this discussion with details about using lease data to drive cost-saving decisions, as well as other lease accounting tips from implementation experts. Do not miss it!
Get more implementation tips from this helpful guide: How to Implement Lease Accounting Technology.
Want to learn more? Schedule a demo today to get started.