This 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.