Life Rafts and Ports: Leasing Takes Many Forms by Sea

By October 22, 2020 November 20th, 2020 ASC 842 compliance, Best Practices, IFRS 16 compliance

Although most cruise vacations may be paused right now, global cruise line corporations continue to leverage leasing as a strategic financial tool to enhance cash flow and reduce firm-wide risk.

Unlike other transportation-based organizations, cruise lines prefer to own their ships due to their bespoke nature and brand standards. However, cruise lines do lease the life rafts found on each ship, which enables the organization to shift the maintenance and upkeep of the boats to the vendor. Also, unique to the cruise industry, there is also a need for port facilities. Many cruise lines have agreements with global ports for use on certain days with customized branding.

With global offices, multiple currencies and a decentralized structure, cruise lines have challenges capturing and tracking lease accounting data when beginning their lease lifecycle process. However, by centrally managing the leasing process, organizations can seamlessly uncover leases and make lease abstraction and uploading easier.

The standards are driving companies to take a fresh look at their lease portfolios. During a recent LeaseAccelerator Customer Connect webinar event, a global cruise line executive noted that with the implementation of the new lease standards, the cruise line’s port facility agreements now fell under the embedded lease definition. Due to this new classification, these port facility leases became the organization’s longest (10-20 years) and sometimes largest leases they’ve ever had.

In order to begin building a successful lease lifecycle program and ensure long-term compliance, finance and treasury leaders must focus on establishing key processes and programs such as:

  • Identifying global key stakeholders
  • Educating and training global teams
  • Locating, collecting and centralizing lease data
  • Deploying an automated system to collect and organize global lease data to optimize processes and obtain sustained compliance

Once the leasing data is in a single, centralized repository that also harnesses automation, lease teams can manage the full lifecycle of their organization’s leases from anywhere, automate lease accounting for improved cash flow and compliance, and drive greater business insights with quantifiable and reportable analytics.

Learn more about best practices of leasing in this eBook, the 15 Critical Success Factors for Your Equipment Leasing Program.

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