The new lease accounting standards under FASB ASC 842 and IFRS 16 address transparency by bringing leases onto the balance sheet to provide investors, lenders, and other financial statement users a more comprehensive view of an organization’s assets and long-term financial obligations. Although the standard has been in use for a while, compliance deadlines are quickly approaching.
During the last couple of years, Crowe has helped many public and private companies prepare for the compliance issues related to the new standards. Many Crowe clients benefited from taking the following approaches:
- Start early. Preparing a compliance plan and implementing it in a timely manner can help organizations save time and money in the long run.
- Collect data. Don’t underestimate the effort required to collect and organize lease and interest rate information in a uniform format.
- Standardize data. Because of the complexity associated with compliance, standardizing data should be a high priority.
- Budget for more help. Additional resources often are necessary for gathering lease data and interacting with other departments and branch offices.
- Involve other departments. Legal, purchasing, IT, real estate, and others involved with leases need to be part of the compliance process.
- Communicate early and often. Because compliance with the new lease accounting standards will require changes for many departments, organizations should provide regular updates and give employees an opportunity to raise concerns and provide input.
- Take a project management approach. Many stakeholders will need training in new procedures, data collection guidelines, software applications, and reporting requirements. Most often, the accounting department spearheads the transition by serving as the project leader and central point of contact.
- Expect the unexpected. Organizations can expect unforeseen twists during compliance implementation. For example, many organizations have discovered previously unidentified leases, while others have identified vague lease terms in some contracts.
- Update auditors regularly. Transitioning to the new standards can significantly affect the balance sheet. Auditors and other participants need to know how the organization will handle lease accounting and how a new technology solution might affect the process.
- Invest in the right software. Early in the process, designate a team to evaluate software solutions and select a solution that can streamline data collection and integrate with the organization’s existing systems.
Crowe Lease Accounting Optimizer
Crowe Lease Accounting Optimizer is a solution designed to help organizations manage their lease accounting processes more efficiently and comply with the new lease accounting standards. It can ease the transition by enabling organizations to:
- Reduce manual data entry
- Streamline accounting processes
- Compile lease data from multiple sources
- Perform parallel accounting using multiple lease accounting standards, including ASC 842, IFRS 16, ASC 840, IAS 17, and cash basis
- Make midlife adjustments automatically after lease modifications
- Improve the timing of lease payments based on cash flow
- Create a full suite of reports to satisfy disclosure requirements
Crowe Lease Accounting Optimizer integrates with the Microsoft Dynamics 365™, Microsoft Dynamics™ AX, and NetSuite platforms.
Visit CroweCRM.com for more information about Crowe CRM services for Microsoft Dynamics 365 software. Have a question or interested in evaluating the CRM functionality in Dynamics 365? Contact us today.