What is the Difference Between Lease Administration Software and Lease Accounting Software?
And Why You Need Both to Comply with the New Lease Accounting Standards
To comply with the new lease accounting standards most companies will need both Lease Administration Software and Lease Accounting Software. Few companies, if any, have an enterprise-quality lease accounting application in place. But many companies have some, if not all, of the lease administration software they require. For example, most companies have a lease administration application in place for real estate, but few have systems installed to track IT, fleet or other types of equipment leases. In this article, we will explain the differences between Lease Administration Software and Lease Accounting Software and their inter-dependency.
What is Lease Accounting Software?
Has a specialized lease accounting engine designed to produce the information needed for your public financial disclosures such as the annual 10-K and quarterly 10-Q reports provided to the SEC. Lease accounting software typically acts as a sub-ledger to track al the debits and credits specific to leasing. Much like a sub-ledger that tracks payroll, inventory, fixed assets or receivables, a lease accounting sub-ledger tracks all the depreciation, amortization, interest expenses associated with your leases. It produces a set of debits and credits that can be uploaded to the General Ledger in your ERP. From there your financial reporting systems can pull the General Ledger to generate all the information needed to create your balance sheet, income statement and cash flow statements under the new standard.
- Lease Accounting Engine – That supports for both the current and new standards for US GAAP (ASC 840 and 842) and IFRS (IAS 17 and IFRS 16).
- Lease Accounting Sub-Ledger – Record asset-level journal entries for leases including commencement, expense recognition, principal reduction, short term and long-term re-classes.
- Classification of Leases – Enable classification of leases, for example operating and finance leases to support FASB’s new ASC 842.
- Financial Disclosures – Generate the necessary debits and credits to support quarterly and annual company quantitative disclosures required by the new standards.
What is Lease Administration Software?
Acts as the enterprise-wide source of master data about your real estate and equipment leases. Lease Administration also provides automated workflow to reduce the time required to book and contract for new leases; renew or expand leases; terminate or purchase assets at the end of term. The automation enables you to grow the size and scale of your leasing program without having to build a large team of lease administrators. The software also helps you to optimize the economics of your leasing program by eliminating wasteful spending and providing insights to negotiate better lease terms. Automated invoice processing and desktop audits identify common landlord billing problems and revenue leakage from uncollected sub-lease income and security deposits. Features such as Lease versus Buy Analysis and Evergreen Fee reporting are provided for equipment leases.
- Lease Database – Track all leases with details on lessors/landlord names, contact information, payment schedules, contract lengths and end-of-term options.
- End-of-Term Management – Automated notifications alert decision makers of a lease that is approaching end of term. Workflows automate renewal, buyout or termination processes.
- Invoice Processing – For real estate leases, invoice line items are compared to expected rents and operating costs. Discrepancies are highlighted before payments are disbursed.
- KPIs and Reporting – Dashboards show the economics and performance of the leasing portfolio. Users can drill down by business unit, geography or asset type.
Want more details? Read the Twelve Features of Lease Administration Software. Or learn more about LeaseAccelerator’s Lease Administration Software.
Why Do You Need Both Lease Administration Software and Lease Accounting Software?
The two applications need to work together closely to ensure you comply with the new lease accounting standards. The lease administration system will notify of the lease accounting system when a new lease is signed; when a lease is renewed, terminated, expanded or contracted. The two applications also need to remain in synchronization on changes to variable rents and end-of-term plans. Any of these changes might trigger a re-measurement and accounting change.
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Learn More about the New Lease Accounting Standards
White Papers, Handbooks and Research Studies
With the deadlines for the new lease accounting standards approaching quickly, many companies are asking how software can help automate the tasks required for the transition period. US GAAP filers adopting ASC 842 will be required to provide three years of comparative reporting.
Learn the differences between contract-level and asset-level lease accounting in this technical white paper. Review examples of the impact of asset-level decisions, judgments and events for material handling, data center and IT equipment.
Considering Lease Accounting Software to comply with the new FASB or IFRS standards? Download this eBook to understand the potential time and cost savings opportunities resulting from automation of lease classification and financial reporting.