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New eBook: Transitioning to ASC 842 using the Portfolio Approach to Group Leases

Posted by Bramasol Leasing Administration Team on Mon, Aug 13, 2018 @ 11:11 AM

LeaseAdministration-HotTipWith less than five months remaining until January 2019, when public companies have to comply with new leasing standards, ASC 842 and IFRS 16, your implementation plans should already be well underway.

Even if you haven't started yet, there is still a small window of time to have a successful Q1 2019 implementation to enable reporting 45 days after March 31, 2019 - but only if you proactively begin now.

This new eBook from Bramasol's leasing experts drills down for a detailed look at key issues and best practices regarding usage of the Portfolio Approach to implementation of the ASC 842 Lease Accounting Standard.

new ebook on Transitioning to ASC 842, using the Portfolio Approach to Group Leases

This is beneficial by grouping leases of assets in the same class that is comprised assets with similar lease terms and discount rates.An entity may apply the Portfolio Approach to a group of leases within an asset class when doing so does not materially change the financial statement presentation when compared to applying the individual lease methodology.

Key topics addressed in the eBook include:
  • When can an entity apply the Portfolio Approach under ASC 842
  • Application of the Portfolio Approach in determining the Lease Term
  • Application of the Portfolio Approach in the Incremental Borrowing Rate
  • Practical Considerations for the Implementation of Portfolio Approach at Your Company

 

Click below to download the ebook.

Download the eBook: Transitioning to ASC 842 using the Portfolio Approach to Group Leases

 

 

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Topics: Leasing-Hot-Tips, ASC 842

Understanding and applying incremental lease borrowing rate analyses under ASC 842

Posted by Julio Dalla Costa on Tue, Jul 17, 2018 @ 04:57 AM

LeaseAdministration-HotTipIn February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02 ( “ASC 842”), Leases, which provides new guidelines that change the accounting for leasing arrangements.

Background on ASC 842

The new leasing standard becomes effective in fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, for: • Public business entities • Not-for-profit entities that have issued (or are a conduit bond obligator for) securities that are traded, listed, or quoted on an exchange or an over-the-counter market• Employee benefit plans that file financial statements with the US Securities and Exchange Commission (SEC).

For all other entities, it becomes effective in fiscal years beginning after  December 15, 2019, and interim periods in fiscal years beginning after  December 15, 2020. Early adoption is permitted at any time for all entities.

The primary purpose of the standard is to address the current accounting treatment of operating leases which are deemed to be off balance sheet financing arrangements and are only disclosed via a company’s financial footnotes in the “Commitments and Contingencies” footnote. Upon the adoption of ASC 842, Therefore, for every identified lease, companies will be required to create a lease liability calculated as the present value of the future fixed payments and a corresponding asset (“right of use” asset). The right of use asset will be amortized over the life of the lease.

The income statement will be impacted by a straight-line lease expense item that would essentially contain an interest component with the amortization of the asset being the plug-in order to achieve straight line lease expense over the life of the lease. One of the key challenges of adopting the new standard will be for companies to assess and apply the incremental borrowing rate applicable to them which will be used in the present value calculations for the capitalization of lease liability and right of use assets related to leases.

Incremental Borrowing Rate

ASC 842 defines “incremental borrowing rate” as: The rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

ASC842 Incremental Borrowing Rate Bramasol tuesday-tip-17JULYCollateralized basis

The definition of “incremental borrowing rate” in ASC 842 represents a change from how that term was defined under ASC 840. The definition under ASC 842 makes it clear that the lessee is required to assess the rate as a secured rate. Under ASC 840, a lessee was to determine a rate that was “consistent with the financing that would have been used in the particular circumstances,” which could have resulted in the lessee using an unsecured borrowing rate.

Accordingly, if a lessee used an unsecured rate to determine lease classification under ASC 840, the adoption of ASC 842 should result in it utilizing a lower discount rate for determining whether the lease qualifies as an operating lease. When combined with other changes from ASC 840, there is a greater chance that leases classified as operating leases under ASC 840 will be finance leases under ASC 842.

Similar term

In determining the incremental borrowing rate, a “one size fits all” will not be sufficient to be compliant with the new standard. Therefore, companies will need to determine the incremental borrowing rate by average lease terms. For example, the incremental borrowing rate applied to a twenty-year lease should not be the same as the rate applied to a three-year vehicle lease.

Similar economic environment

Many companies have asked whether it is possible to use the Company’s corporate cost of capital borrowing rate which is usually is at the company’s headquarters. As noted in the guidance, the incremental borrowing rate will have to applied to similar economic environments so wherein companies have corporate debt at the US headquarters they will be forced to assess and document the differences in rates in different economic environments such as in countries such as China, Brazil, Argentina and some countries in Africa where the economic environments are vastly different than in the Unites States.

Incremental borrowing rate at date of adoption

The incremental borrowing rate should be applied at the date of adoption which for public companies will at 1/1/2019. Companies should start to assess the incremental borrowing rates as early as possible and then update as needed for any changes to the terms and economic environments throughout 2018 so at 1/1/19, there is a clear and precise documentation of the methods used and assumptions made for the various rates.

Private company’s considerations

Because of the difficulty of determining the incremental borrowing rate, ASC 842 also provides a practical expedient to private companies by allowing those reporting entities to use a risk-free rate to determine lease classification. While the risk-free rate is certainly easier to determine than the incremental borrowing rate, the use of the risk-free rate could result in more leases qualifying as finance leases because the present value of the lease payments determined using the risk-free rate will be greater than the present value determined using the incremental borrowing rate. Accordingly, private company lessees will need to carefully consider the implications if they elect to use the risk-free rate.

Conclusion:

As companies start assessing the adoption and implementation, careful consideration of the incremental borrowing will need to perform because of the challenges in the new definition of the incremental borrowing rate under ASC 842. Companies should start having meaningful conversations with their respective treasury departments to determine the various rates that will need to be applied on 1/1/19.

 

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Topics: leasing, Leasing-Hot-Tips, SAPLeaseAdmin, ASC 842

Transitioning to ASC 842, Where are all your company’s lease documents?

Posted by David Ogletree on Tue, Jul 10, 2018 @ 02:33 AM

LeaseAdministration-HotTipThe new lease accounting standard ASC 842 is effective for public companies beginning January 1st, 2019. The primary purpose of the standard was to address the fact that most operating leases are deemed off balance sheet financing arrangements and currently are only disclosed via a company’s financial footnotes in the “Commitments and Contingencies” footnote.

Therefore, for every identified lease, companies will be required to create a lease liability calculated as the present value of the future fixed payments and a corresponding asset (“right of use” asset). The right of use asset will be amortized over the life of the lease. The income statement will be impacted by a straight-line lease expense item that would essentially contain an interest component with the amortization of the asset being the plug-in order to achieve straight line lease expense over the life of the lease.

Primary issue is locating the entire population of active leases

Since companies were not required to capitalize leases in the past, record keeping for leases were often decentralized.  Most companies did not ever require operating leases to go through a formal capital committee review.  This meant record keeping and leasing terms were often undocumented.  The leasing related companies often transfer(sell) existing leases in their portfolio to other leasing companies making it even more difficult to track down leases.  The new standard is forcing companies to go through the process of locating all their operating leases.  For many firms this is an onerous task as some leases are decentralized and managed by their subsidiaries.  The following is a course of action to gather all the leases for an entity for ASC 842 accounting determination.

These five required steps to completeness and determination will help make sure that all leases have been analyzed for proper ASC 842 adoption.

Make sure all leases have been analyzed for proper ASC 842 adoption_tue-tip-10JUL

1) Commitments and Contingencies Footnote Schedule

Even though companies were not required to account for their operating leases on their balance sheet under ASC 840, there were required footnote disclosures.  The operating leases for future periods were disclosed in the “Commitments and Contingencies” section of their 10-K filings.  This disclosure would serve as a starting basis for all active operating leases.  The footnote would most likely contain a schedule of all future annual lease payments, lease terms, and minimum required lease payments. This schedule would be the beginning basis for the master lease schedule.

2) Leasing/Legal Department Inquiries

Some very large or lease centric companies have a Leasing department.  The Leasing department would likely have a listing of all approved leasing companies and all related contact information. The Leasing department would be the starting point of all lease negotiations and final lease execution. Inquire with leasing management as to their current active lease files.  This population of leases discovered in your initial inquiry of leasing management should detect leases not included in the “Commitments and Contingencies” footnote disclosure.  The Legal department is also a key contact regarding leases(and contracts) to make a formal inquiry.  The Legal department reviews, negotiates, and approves all legal documents.  The Legal department would keep a repository of all approved and executed legal documents.  Access to this contract repository will aid in the detection of “embedded leases”.  Embedded leases are leases under ASC 842 that are within a services contract not currently accounted for as an operating lease and therefore not included in the “Commitments and Contingencies” footnote.   

3) AP Sub-Ledger Analysis

As the company continues to navigate ASC 842 adoption, for completeness purposes, all payments in the AP sub-ledger in the trailing twelve months should be reviewed. These payment records should be reviewed in detailed for any vouchers that might relate to a lease and was not present in the 10-K or the Leasing/Legal department contract files.  Companies should query their detailed AP data for key words such as “lease”, “rent”, “building”, “equipment” and the like.  It would also be prudent to query the AP data for the entity’s common lease related vendors.   The leasing company vendor list would have been provided by Leasing management or AP management.  All leases detected through the AP sub-ledger should be matched against the list derived from the prior lease detection efforts.  All unmatched leases should be added to the original list to continue building the master lease schedule.  The next step in the AP analysis is reviewing payment files for any monthly recurring payments.  Trace these recurring payments to the AP voucher and compare to the master lease schedule.  Any voucher that is recurring and not already included on the master lease schedule would require further analysis to determine if it is indeed a lease. If the payment relates to a service contract, review the contract in the files of the Legal department, as discussed earlier to determine if there is an embedded lease.

 4) GL Detail Analysis

Next, a detailed listing from the general ledger for the rent expense account(s) should be examined and compared against the list derived from the all the previous lease detection efforts.  This is to detect payments or reclasses that are lease related but outside the AP sub-ledger.  This process may reveal wire transfers related to a lease or transactions that are lease related but not detected by the prior lease detection steps.

A detailed listing of the general ledger for property tax and insurance expense should also be examined and compared against the data derived from the previous inquiries.  This listing may detect property taxes and insurance expense for net leases not otherwise accounted for in the prior steps.

5) Treasury Department inquiry

All wire transfer payments should be reviewed for any payments that might relate to a lease.  Treasury departments routinely wire transfer large rent payments, especially related to leased real estate due to the exorbitant late fees charged in standard rental agreements. 

It would also be prudent to review the operating bank statement for wire transfers posting towards the end of the month that might relate to a lease. These wire transfers can be traced back to the wire transfer request documentation to determine if the payment is lease related.

Summary

As companies move through these steps to finalize their entire lease population, it is advisable to return to the Leasing and Legal department with the leases discovered that were not included in their original Leasing and Legal department inquiry.  This will allow these departments to update their corporate files and better manage the lease administration process.  The Leasing Department in collaboration with the Corporate Accounting department, may want to consider having a central repository software program for all the company’s leases, terms, minimum required lease payments, etc.  This will aid the Accounting department on a going forward basis as all new leases will be required to be analyzed for proper ASC 842 lease adherence. It will also allow for much stronger internal controls surrounding the leasing environment, and consequently, more accurate financial reporting.

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Topics: leasing, Leasing-Hot-Tips, IFRS16, ASC 842

Getting Ready for the New Lease Accounting Standards

Posted by Bramasol Leasing Administration Team on Tue, Jun 26, 2018 @ 05:34 AM

LeaseAdministration-HotTipThis recent article in Accounting Today provides a useful summary of the key issues that companies are facing as they get ready for compliance with IFRS 16 and ASC 842.

The changes, which take effect in January 2019 for public companies changes will require companies to recognize all leases as assets and liabilities, unless the lease term is 12 months or less, or the underlying asset has a low value.

Implementation of the new standards will require companies to do the following:

  • Track the details on all lease contracts (buildings, cars, office space, equipment, etc.).
  • Break down the contracts into the relevant components that determine the classification of the Right of Use Assets and Liabilities.
  • Make the appropriate calculations.
  • Generate the appropriate journal adjustments to accurately reflect leases on the balance sheet and income statement.

Regarding the current state of implementation, the article cites these key points:

"As was the case with revenue recognition and other accounting changes, readiness for the new lease accounting guidelines is lagging, and many organizations will be scrambling to comply in the second half of 2018. According to a recent Robert Half/Protiviti survey, more than half of companies surveyed (56 percent) have not begun transitioning to the new lease accounting standard. Sixty-nine percent of the largest firms have started the process, compared to 37 percent of the smallest organizations surveyed."

The top four challenges firms face in the transition include training staff, diagnosing the needed changes, finding professionals with the requisite expertise and updating their technology.

  • Too Complex and Risky for Spreadsheets
  • Best Practices in Lease Accounting
  • Standalone Applications
  • Integrated Applications

Leasing compliance- Implement the new standards IFRS 16 and ASC 842 26 Jun 2018Click here to read the full article in Accounting Today.

Overall, the article underscores the key point that Bramasol has been advocating since the new lease accounting standards were first adopted:  Get Started Now!

Rapid Leasing Compliance Solution Click Here to Learn More

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Topics: Leasing-Hot-Tips

Companies Need Holistic Approach to Lease Accounting Compliance

Posted by Bramasol Leasing Administration Team on Tue, Jun 5, 2018 @ 03:36 AM

LeaseAdministration-HotTipA recent article in Accounting Today provides an excellent view of how companies in many industries are moving toward compliance with the new lease accounting standards, ASC 842 and IFRS 16.

Highlights of the article include:

“The approach for implementing this lease accounting pronouncement really needs to be holistic for a company,” said CohnReznick partner Rebecca McDonald. “It can’t be siloed with just the accounting department. It has a broad reach across the organization and impacts a lot of different departments.”

The new standard requires putting many leases on the balance sheet for the first time, and she believes the accounting and finance department needs to take the lead role to drive the implementation. But the effort also should heavily involve the operations, IT, treasury, tax and facilities groups.

“It just has a broad reach,” said McDonald. “You have to work across the organization to really be able to gather all the information needed to implement the standard as far as the leases go, and to have that holistic team approach to make sure you leave no stone unturned when analyzing whether any of your contracts or any of your leases that haven’t been on the balance sheet are reported that way will be impacted, just to make sure that you have a complete inventory of all the contracts and leases that are in the organization. It’s just a lot heavier lift than it has been historically.”

The article also provides information from a recent survey conducted by staffing company Robert Half and consulting firm Protiviti, which focused on how companies are doing with the transition to new lease accounting standards.  The survey found that only 44 percent of companies have begun the transition process and that, of those that have started, only 48 percent have completed an assessment of what needs to be done.

Business services companies were the most likely to have begun the transition, at 71 percent, according to the survey respondents. Only 31 percent of executives in the retail and wholesale industry and 25 percent in construction said their organizations are currently working on adopting the new standard.

LeasingByIndustry

Click here to read the full article in Accounting Today.

Click here to learn more about Bramasol's solutions for Lease Accounting Compliance solutions.

 

Rapid Leasing Compliance Solution Click Here to Learn More

 

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Topics: Leasing-Hot-Tips, ASC842, IFRS16

General Availability for New Version 4.0 of SAP Lease Administration by Nakisa

Posted by Bramasol Leasing Administration Team on Tue, May 29, 2018 @ 07:29 AM

LeaseAdministration-HotTipNakisa, Bramasol's partner for leasing solutions, has announced general availability of the new 4.0 version of Lease Administration by Nakisa.

For SAP customers, this assures that Lease Administration by Nakisa 4.0 will integrate seamlessly with their SAP suite, and that the product has been tested and validated by SAP for security, performance, supportability, accessibility and documentation. The new release is compatible with current and upcoming SAP landscapes, while  reducing TCO for implementation, ERP integration costs, and overall risk.

Lease Administration by Nakisa is a simple and cost-efficient lease accounting solution, designed to support regulatory compliance with new leasing standards, manage global lease portfolios and streamline lease accounting operations. Lease Administration by Nakisa 4.0 introduces key enhancements including:

  • Enhanced compliance with new lease accounting standards (IFRS 16 and ASC 842)
  • Better control of the lease process from master lease agreement to contract level
  • Improved bi-directional integration with SAP

Learn more here.

According John Froelich, Vice President of Marketing and Strategy at Bramasol, "Nakisa's release of version 4.0 is another major step forward in continuing their leadership in solutions for leasing compliance, optimization and overall financial transformation.  These features enhance an already rich solution, deepening it's overall capability and widening the gap between it and other so-called lifecycle lease solutions."

As a partner of both SAP and Nakisa, Bramasol provides a holistic view to the impact that the new Leasing standard will have on your organization and purpose-built solutions for both rapid compliance and long term optimization of lease administration.  Learn more about Bramasol Leasing Solutions here.

Rapid Leasing Compliance Solution Click Here to Learn More

Nakisa 4.0 key enhancements

 

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Topics: Leasing-Hot-Tips, ASC842, SAPLeaseAdmin, IFRS16

ASC 842: FASB provides an additional optional transition relief for companies

Posted by Julio Dalla Costa on Tue, May 22, 2018 @ 03:19 AM

LeaseAdministration-HotTipOn January 5th, 2018, the Financial Accounting Standards Board (FASB) proposed adding an optional transition method and another practical expedient for lessors to Accounting Standards Codification (ASC) 842, Leases, to reduce the cost and complexity of implementing the new standard.

With the proposed transition option, the FASB is responding to concerns raised by entities, particularly those that plan to implement new systems to comply with the guidance. These entities said that the current requirement to apply the new leases standard to the comparative periods presented in the year of adoption would be more costly and complex for them to implement than the FASB initially anticipated. 

FASBlogo

On March 7, 2018, the FASB approved the changes to the comparative reporting transition guidance, providing an optional transition method when adopting Topic 842.

So, what does this mean?

For many companies who recently implemented ASC 606 and used the modified retrospective approach had to recast their financial statements to the earliest periods presented. This meant that they had to go back two years to the earliest reporting period presented and incorporate the changes into the transition entry to retained earnings as the date of implementation.

At its November 29 meeting, the FASB proposed allowing entities the option to instead apply the provisions of the new leases guidance at the effective date (e.g., January 1, 2019), without adjusting the comparative periods presented. In the case of the adoption of ASC 842, if companies were to adopt on 1/1/2019, that means that companies would have to recast fiscal years 2017 and 2018 for the adoption of ASC 842.

For example, a calendar-year entity that adopts the standard on 1 January 2019 and presents two years of comparative financial statements applies the transition provisions on 1 January 2017 (i.e., the beginning of the earliest comparative period presented). Under the proposed transition method, the entity would apply the transition provisions on 1 January 2019 (i.e., the effective date).

Under the proposed new method for transition, companies will be allowed to continue using and presenting operating leasing under ASC 840 and then prospectively adopt ASC 842 on 1/1/2019. The proposal could simplify transition to the new guidance. For example, a lessee would not have to measure and recognize leases that expired prior to the effective date or consider the effects of each modification for leases that were modified more than once during the comparative period presented. Under the proposed transition method, entities could opt to continue to apply the legacy guidance in ASC 840, Leases, including its disclosure requirements, in the comparative periods presented in the year they adopt the new leases standard.

Entities that elect this option would still adopt the new leases standard using a modified retrospective transition method, but they would recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption rather than in the earliest period presented. Entities would still be required to apply different recognition and measurement requirements in the post-adoption period to leases they entered before adoption and those they enter after adoption.

Group of three practical expedients

In addition to the optional relief proposed by the FASB, there was already the “group of three” practical expedients that was previously proposed and approved. The practical expedients apply to all leases in place at the time of transition. However, the practical expedients must be applied as a package.

The practical expedients are:

  • An entity need not reassess whether any expired or existing contracts are or contain leases.
  • An entity need not reassess the lease classification for any expired or existing leases (that is, all existing leases that were classified as operating leases in accordance with Topic 840 will be classified as operating leases, and all existing leases that were classified as capital leases in accordance with Topic 840 will be classified as finance leases).
  • An entity need not reassess initial direct costs for any existing leases.

ASC842-TransitionExpedients

In addition, the standard provides this practical expedient which may be elected separately from the above:

An entity also may elect a practical expedient, which must be applied consistently by an entity to all its leases (including those for which the entity is a lessee or a lessor) to use hindsight in determining the lease term (that is, when considering lessee options to extend or terminate the lease and to purchase the underlying asset) and in assessing impairment of the entity’s right-of-use assets. This practical expedient may be elected separately or in conjunction with the practical expedients noted above.

Summary:

By the additional optional transition method as well as the practical expedients, companies are being provided with significant relief for the adoption of ASC 842. However, companies that rely extensively on leases for operating assets, the transition is likely to be labor intensive even when applying the practical expedients.

 

 Rapid Leasing Compliance Solution Click Here to Learn More

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Topics: leasing, FASB, Leasing-Hot-Tips, ASC842, SAPLeaseAdmin

New Rapid Compliance Solution for Lease Accounting Standards ASC 842 and IFRS 16

Posted by Bramasol Leasing Administration Team on Tue, May 15, 2018 @ 12:00 AM

LeaseAdministration-HotTipBramasol, the leader in compliance and finance innovation solutions, has announced a new, purpose-built product that reduces complexity and implementation costs, to give companies across a variety of industries a ready-to-deploy solution for lease accounting disclosure reporting and compliance.

In 2016, the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) issued new standards for lease accounting: IFRS 16 & ASC 842, which must be implemented by 2019. Both IFRS 16 and ASC 842 are the result of a joint effort between the IASB and FASB to meet the objective of improved transparency, comparability and financial reporting.  These changes will impact virtually all companies, whether lessors or lessees.

Since the new leasing standards-setting process began, Bramasol has been at the forefront of addressing critical issues to help our customers get ready for both IFRS 16 and ASC 842. We have developed the Lease Administration Solution Engagement Roadmap (LASER) that brings together all compliance requirements, stakeholder needs and work-stream processes within a unified and disciplined implementation process.

The Rapid Leasing Compliance Solution further distills these overall efforts in a targeted solution, designed to help companies with straightforward leasing portfolios to cut through the complexity of the new standards and achieve compliance without excessive hassles or expense.

This purpose-built offering is designed for companies with up to 300 leases and includes:
- 5 Basic Scenarios for Real Estate, Movables, or both
- Set-up of Nakisa and/or RE/FX
- Standard data & document loading
- Security set-up
- Standard out-of-the-box disclosures and reports for ASC 842 or IFRS 16

Click Here to see more details on Rapid Leasing Compliance Solution

Rapid-Compliance-banner-social-new

 

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Topics: Leasing-Hot-Tips, ASC842, SAPLeaseAdmin, IFRS16, RLCS

Join SAP Leasing User Group Meeting at EXXON, May 3, 2018

Posted by Bramasol Leasing Administration Team on Mon, Apr 30, 2018 @ 11:11 AM

LeaseAdministration-HotTipSAP Leasing User Group

Hosted by ExxonMobil
(Options for In-person or Online Attendance)

May 3, 2018 - 10 AM PDT / 1 PM EDT

Join us for the latest SAP Leasing User Group Meeting hosted by ExxonMobil, Bramasol and SAP. Pete Graham will chair a robust discussion on the latest issues and challenges on SAP Leasing Solutions. Solution and Accounting experts from Bramasol and Nakisa will be onsite to provide additional insights into the product and project based experience.

If you are looking for real answers on how you can use the SAP solutions to comply with ASC 842 and IFRS 16, then this is the place for you. The discussion will include ample opportunity for open Q&A to allow participants to get answers to specific questions.

Please join us in person at ExxonMobil for what promises to be a great meeting. 

ExxonMobil Global Services Company
22777 Springwoods Village Parkway (W1.4A.345) 
Spring, Texas USA 77389

This will be available both in person and as a remote dial-in for those who cannot attend in person.

Register Here to Attend Online 

If you plan to attend in person, please email your Name, Email and Company to jfroelich@bramasol.com and we will add you to the list.

LeaseAccounting

Looking forward to seeing you there!

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Topics: Leasing-Hot-Tips, SAPLeaseAdmin

Companies Brace To Put Leases On Balance Sheets

Posted by Bramasol Leasing Administration Team on Mon, Mar 12, 2018 @ 04:17 AM

LeaseAdministration-HotTip.jpgThis recent article in Global Finance provides an excellent overview of challenges facing companies regarding compliance with new Lease Accounting standards, ASC 842 & IFRS 16, "Companies Brace to Put Leases on Balance Sheet".

Some highlights from the article are as follows:

"It’s not just 2019-and-forward numbers that need to be stated. The standards also require restatement of prior years’ balance sheets. While the international standard requires all leases to be clearly delineated, the US GAAP standard parses some fine points, exempting many small-value or short-term leases. It also exempts leases of intangibles, mineral rights, inventory, timber and assets under construction."

"Restating the books won’t be a fully automated task. Even technologists acknowledge that there’s no downloadable magic wand that will move the leases from the footnotes into the accounting equation.

The difficulties start, as they often do, with the data gathering phase.

“Most companies don’t have this end of the enterprise electrified,” says Pete Graham, SAP’s director of finance solutions and mobility. “Most lease data still resides in paper contracts.”

He cites the transportation, retail, pharma and oil-and-gas sectors as the ones most impacted by the accounting changes. They, presumably, become the ones that will need to explain the new guidance to the stock analysts and rating agencies."

So, where do you go from here?

As a recognized industry innovator in transformative Office of the CFO solutions and the clear leader in helping companies implement recent major changes to Revenue Recognition standards, Bramasol has now also jumped out ahead of the curve to create strategic and tactical implementation solutions for ASC 842 and IFRS 16 lease accounting changes.

All companies, whether lessors, lessees or both, need to leverage the process of changing their lease management methodologies. This will allow them to gain better visibility of their lease portfolios, streamline the process of lease management and reduce overall costs.

Our holistic approach assures Compliance with the new standards while also providing a structured solution for Optimization of all lease administration and portfolio management and an integrated system for Transformation of how leasing is handled within overall end-to-end business processes.

Companies Brace To Put Leases On Balance Sheets_blog-graphic-12-mar-updated.jpg

For more information, visit the Bramasol Leasing Solutions web page.

 

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Topics: Leasing-Hot-Tips

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