It’s clear that the journey towards and beyond compliance with lease accounting standards (ASC 842, IFRS 16, & GASB 87) is fraught with challenges and opportunities. The strategic importance of effectively managing a lease portfolio becomes even more apparent in today’s economic climate.
The initial wave of adopting new lease accounting standards such as ASC 842 was not merely a compliance exercise but a transformative process for organizations worldwide. This transition period illuminated the potential for lease portfolios to significantly reduce risks and unlock real business benefits when managed with intention and strategic foresight.
With the foundational compliance phase behind us, the enduring challenge for organizations is maintaining this compliance dynamically. This necessitates an integrated effort across various functions—real estate, finance, operations, legal, and procurement—to ensure information is accurately managed and utilized, minimizing exposure to risk and enhancing strategic decision-making capabilities.
Audit and accounting professionals underscore the importance of meeting compliance mandates and leveraging the audit process as a strategic tool for refining lease management practices. Audits offer a unique lens through which to view lease agreements, providing opportunities to strengthen internal controls and operational insights.
The transition to ASC 842 opened up a series of emerging topics that continue to evolve. The complexity of lease agreements and the dynamic nature of today’s economic environment call for ongoing diligence in lease management. The optimization and strategic advantage opportunities that arose during the initial adoption phase are just as relevant today, if not more so.
The detailed lease data organizations have worked hard to compile and maintain is a veritable gold mine of strategic value. Leveraging lease accounting data now allows management to make more informed and agile business decisions, optimize operations, and achieve cost savings on a previously unattainable scale.
As we look back on the insights shared in the past and their application in the present day, the journey through and beyond lease accounting compliance emerges as a pathway to significant operational and strategic benefits. The detailed work required to achieve compliance offers a foundation upon which companies can build to streamline operations, negotiate better terms, and foresee future costs more clearly, transforming their lease portfolios into strategic assets that drive efficiency and savings.
If you’d like to learn more about reducing risk and leveraging your lease portfolio to drive better outcomes, watch a quick overview of VL’s platform.
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