Frequently Asked Questions
About Equipment Lease Management
FAQs – LeaseAccelerator
“Split-Stream Renewals” is one of the more complicated equipment leasing scenarios we have faced. Suppose you are a chemicals company that has leased 30 servers for your data center. At the end of the lease term, the IT department decides that it wants to keep 10 of the servers to support a critical production application for another 12 months. What about the other 20 servers? IT plans to send them back at some point in the near future.
Therefore, the Procurement department negotiates a 12-month renewal for the 10 servers on a quarterly payment schedule. The other 20 servers go into month-to-month evergreen payments. A few weeks later IT decides that it needs to keep the 20 servers for at least six months while the workloads are transitioned to newer boxes. Rather than continue the evergreen payments, Procurement decides to negotiate a six-month renewal for the 20 servers.
Here is where it gets tricky. The renewals for the 10 servers and the 20 servers both have quarterly payments. But the payment cycles are different. The 10 server payments are due January, April, July and October. The 20 server payments are due in March and June.
Can your ERP application handle the accounting and lease management for split-stream renewal scenario? We didn’t think so.
We have lots of interesting examples, but two that stand out are:
Corporate Jets – We hosted a competitive bid for two Gulfstream G650s. Multiple leasing companies bid on the lease terms which saved our customer $4.4 Million. That’s big money!
Here is a picture of the Gulfstream.
Mining Equipment – We financed a deal in Zambia. It was for $550,000 of mining equipment. How cool is that?
Here is a map of Africa with Zambia highlighted in case you are wondering where it is.
Read a brief history of the new lease accounting standards.
FAQs – The New Lease Accounting Rules
According to the International Accounting Standards Board (IASB), listed companies are estimated to have around $3.3 trillion of leasing commitments, over 85 percent of which are off-balance sheet. Leasing obligations for a specific company can range from a few million dollars (on the low end) to tens of billions of dollars (on the high end). For example, Walgreens and AT&T each have over $30 billion in operating leasing obligations, while Hershey and Harley Davidson each have only a little more than $50 million in operating leases.
See a ranking of which Fortune 1000 companies are most impacted.
The deadline will vary depending upon your fiscal year and public or private company status. Public companies with fiscal year ends on December 31, 2018 began applying the new standard January 1, 2019. All public companies will be required to implement during 2019 at the start of their fiscal year. Private companies follow in 2020.
A wealth of excellent documentation has been produced on the technical accounting aspects of the new lease accounting standards. The boards (FASB and IASB) have each published impact analysis studies and detailed accounting examples in addition to the actual standards documentation itself. Each of the Big Four (PWC, EY, Deloitte, and KPMG) have also published excellent perspectives, discussions, and guides to interpret the standards.
See the Top Resources and Guides from the Standards Boards and Big 4 on the New Lease Accounting Standards.
FAQs – How to Implement the New Lease Accounting Rules
Read a brief history of the new lease accounting standards.
Read the Top 10 Business Risks with the New Lease Accounting Rules.
See a Demo of our Enterprise Lease Accounting Software
Learn More about Enterprise Lease Accounting
White Papers, Handbooks, and Research Studies
Lease Accounting Software Evaluation Guide
Identify the critical lease accounting software requirements for day 1 compliance and long-term success with ASC 842 & IFRS 16.