Since the release of new lease accounting standards ASC 842 and IFRS 16 in 2018, companies have taken a variety of approaches to comply, but many are now aiming to optimize their lease accounting processes for efficiency and long-term manageability. It is becoming clear that standalone software and offline spreadsheets cannot provide the level of financial integration needed to go the distance for supporting a robust Comply, Optimize, and Transform journey.
Companies faced with the lease accounting compliance deadlines over the past 2-3 years opted for “quick and easy” standalone or offline approaches that emphasized basic compliance over long-term integration, efficiency, and scalability.
As a result, most of these companies are now grappling with major roadblocks when it comes to managing lease accounting compliance in relationship to overall business goals, especially when it comes to coping with dynamically changing lease portfolios.
One of the biggest shortcomings from taking the standalone solution approach is the narrow focus on cataloging existing lease portfolios and analyzing them against the new compliance criteria. In effect, this is like just taking a static snapshot of a constantly changing environment.
So, how can you overcome these shortcomings related to standalone or offline approaches?
With the upcoming already extended deadline for the adoption of ASC 842, the new lease accounting standard in the US, many companies who have already adopted are struggling with managing the accounting under the new standard in spreadsheets or because they already chose a standalone software but are not happy with the results due to a lack of integration, causing reconciling issues or reporting inaccuracies.