What is lease accounting?
Lease accounting is the practice of complying with ASC 842, IFRS 16 or GASB 87 compliance standards. This means that all leases that meet the lease threshold are accounted for on an organization’s balance sheet as an asset and liability. This is different from prior practices where leases could be mentioned as footnotes in corporate financial statements.
What is Lease Accounting Software?
Lease Accounting Software is a software as a service (SaaS) that easily manages tracking and reporting on all financial aspects of leases, including right-of-use assets, interest expenses, liability, and other elements under FASB and IASB guidance.
What Does Lease Accounting Software Do?
New reporting standards for leasing
The complexity of lease accounting has changed drastically within the last few years, due to the introduction and adoption of ASC 842 and IFRS 16.
Previously, it was easy to track the financials of operating leases manually with spreadsheets. However, the new reporting standards provides new, more complex standards, including a significant impact on financial reporting.
As a result, many more data points need to be tracked and audited within lease accounting software. An automated lease accounting software solution can ensure consistent and accurate calculations.
Automate a process that would otherwise be manual
Without lease accounting software, using manual processes opens up companies to auditing errors and risks.
Between the potential for typos, misplaced decimals, and formula errors, human error alone can severely impact your business during an audit. Also, the overall heavy level of detail required within ASC 842 and IFRS 16 is often too much information for one spreadsheet to handle, therefore increasing complexity.
Lease accounting software automatically tracks all the fields you need for accurate calculations and reporting. Calculations are built right within the platform to pull from any numerical field, therefore eliminating any concerns that arise from old, manual processes.
Lease management to keep up with data needed for disclosure reports
Lease accounting relies heavily on accurate lease data. Without a proper way to track and manage your leases, data that is needed for disclosure reports could easily become outdated and inaccurate.
Lease management software provides a seamless way to track all lease data that pertains to ASC 842, IFRS 16, and beyond. Made up of two functions, lease administration and lease accounting, lease management software ensures one single source of truth for lease data.
Important Features to Consider When Purchasing Lease Accounting Software
Automated Journal Entries
Easily generate different types of operating and finance lease liabilities within journal entries by using data maintained within the platform. Once your data has been populated within the system, everything from calculations to journal entries to disclosure reports can be generated automatically.
Robust reporting capabilities provide access to view information stored within the platform, through both standard and ad-hoc reports. Users can select to view standard out-of-the-box reports, or build their own configurable, ad-hoc reports on any field within the platform.
Lease Administration vs “Just” Accounting
The data tracked within a lease administration solution is critical to generating accurate calculations. Lease administration software goes hand-in-hand with lease accounting software. Lease administration includes, but is not limited to:
- Lease documentation management
- Initial and ongoing lease data input
- Management of legal and financial obligations/payments
These essential lease administration tasks provide checks and balances within lease accounting software functions, including:
- Initial and ongoing accounting calculations based on lease data
- Generating journal entries to ledger
- Running disclosure reports and backup
Flexibility to manage ASC 842 & IFRS 16
Regardless of your company’s lease accounting compliance needs, a lease accounting software that is fully configurable enables you to capture specific fields and track lease data to meet both ASC 842 and IFRS 16 requirements. Utilizing a system that allows you to easily configure relevant lease data helps organize your information to match your processes.
Seamless, end-to-end implementation makes sure your lease accounting software is up and running quickly and successfully. A properly experienced implementation plan provides milestones throughout each phase, including:
- Identifying key project goals
- Best practice consultation
- Data migration import templates
- Training, sign-off, and support
View more information about Visual Lease’s implementation.