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.
As leasing arrangements continue to become more diverse and entail complex cross-integration requirements for managing leases within bundled Digital Solutions Economy offerings, it is increasingly important for lessor companies to have a comprehensive understanding of the compliance issues both for lessor accounting under ASC 842 and revenue recognition under ASC 606.
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.
Webinar: Lessor Accounting and Automated Revenue Management (ARM) are Key for Supporting New Business Models
Lessor accounting, along with integrated revenue management, are becoming more critical with the adoption of the Digital Solutions Economy (DSE) by many companies. It is no longer a viable approach to try using standalone or offline lease accounting methods because the lack of integration with revenue and other accounting processes is too cumbersome to scale or adapt for new models.
Learn how to seamlessly execute full lessor accounting transactions including full accounting for sales type leasing, operating type leases and a decision tool that assists users with evaluating between the two types of leases.
You can have a single, integrated solution for Lessor Accounting from SAP. Watch now the webinar as Bramasol shows you how we can bring together two of the most powerful solutions for revenue and lease accounting SAP RAR and CLM to deliver a comprehensive, scalable and integrated solution managing both your Operating and Sales Type leases all in one place.
Discover the power of SAP for Lessors through the convergence of Revenue Recognition and Lease Accounting. Is a lease out a Revenue Accounting or Lease Accounting Challenge - it is both! And only SAP and Bramasol can bring you an integrated solution that brings together both of these areas in a seamless way.
Webinar Video - Technical Accounting Tips for Optimizing Disclosures and Reporting for ASC 606 and 842
According to the Big 4, over 50% of companies experienced a delay in compliance with ASC 606 and 842 due to accounting issues. Those same companies struggled to produce their disclosures and reporting. Underlying this are the technical accounting expertise and disciplines needed for success.
Listen to the latest podcast in Bramasol's Insights to Action series.
Many of you are in the midst of filing your first quarter ASC 842 adoption footnote disclosures. If you used brute force and/or a limited-scope point solution, how did that go? If you used a non-integrated solution, how did the reconciliations go between asset accounting and payments? Excel spreadsheets are not a realistic long term solution. Feel like you’re stuck in a dead-end now? You don’t have to be!