Five Keys to Success with Your Lease Accounting Project
Worried about implementing the new lease accounting standards? The first implementation date for the new lease accounting standards is less than a year away, but if you haven’t started, you’re not alone. Many companies don’t know where to start or how to avoid missing important steps. To provide some clarity, we’ve explained the five major components of the lease accounting project. If you prepare for these steps now, you’ll avoid having to repeat steps later on, saving time and money.
1) Build a Cross-Functional Team
To comply with the new leasing standards, the accounting team will be critically dependent upon the rest of the business to help identify all of the leases and to capture the required data. Leasing touches almost every part of the business from Accounts Payable and Procurement to IT and Real Estate. To succeed, you should establish a cross-functional team of representatives from all of these groups.
To learn more, download Reasons to Include Procurement in Your Project
2) Pinpoint the Issues with the Technical Accounting
The expanded definition of a lease and the need for asset-level accounting are frequently raised as the two key challenges of the new standard by many companies. The expanded definition of a lease will require companies to identify and report embedded leases – a time consuming process. Accounting at the asset level is required in order to conduct accurate lease accounting in the case of partial events occurring on some of the leases. Asset-level accounting can be extremely difficult without the right level of automation.
To learn more, read our Asset-Level Lease Accounting white paper
3) Collect the Data
You will need to gather over 100 pieces of data about each lease to perform the proper accounting. While some of this data may be available in various spreadsheets, there’s a lot that won’t be recorded anywhere. Make sure you find all of the accurate data necessary for your implementation project the first time. You don’t want to have to repeat this process.
To learn more, read our 10 Steps to Collecting the Data eBook
4) Choose Your Software Package Carefully
It’s critical to perform due diligence when selecting a lease accounting software. Many lease accounting applications were only recently developed and haven’t been fully tested. Try asking the software vendor to demonstrate that the application works with a sample of your company’s data. Don’t just let them use their pre-set data.
To learn more, read our Lease Accounting Software Evaluation Guide
5) Setup a Model for Day Two and Beyond
Achieving compliance for day 1 is great, but you’ll also need to maintain the accuracy of your lease accounting data on day 2 and beyond. You should establish processes so that your accounting team will always have access to the lease terms they need for proper reporting. It’s crucial to start developing these processes and controls now so that when day 2 arrives, you don’t have to scramble.
To learn more, read our 15 Critical Success Factors to Equipment Leasing eBook