LeaseQuery’s Lease Accounting team recently attended the Current Financial Reporting Issues conference (CFRI conference), in New York City on November 13th and 14th and came back with a few important takeaways and action items related to the new lease accounting changes.
Take Away #1: About half of the attendees have started their lease accounting transition project while the other half had either not started or were just in the beginning stages.
Action Item: If you have not already started the lease accounting transition project, you need to get started NOW. The boards have made no indication they are moving the date. Here Is a Free Lease Accounting Transition Guide to Help You Get Started:
Take Away #2: The financial leaders at the conference main point of contention with the new standard was the timing. They felt that with the work required to implement the new revenue recognition standard 606 took away several resources that would also need to work the transition to the new lease accounting standard 842.
Action Item: Work with a firm and/or lease accounting software vendor who has resources to help you with the transition. As you select your lease accounting software vendor make sure they have accountants available to help during the process.
Take Away #3: Many of the financial leaders we spoke to have concerns that either their internal solution may not be ready in time for the new standard or that the lease accounting software vendors may not meet their requirements in time for implementation.
Action Item: Be aware there are at least two software vendors who are able to meet the requirements under the new guidance. We at LeaseQuery went even further and had our calculations audited so you can have peace of mind that it is not only complete but accurate. If you are trusting companies who don’t have everything complete and audited already then you are making a huge bet it will be done time.
Take Away #4: During one breakout session, an accounting leader from one of the big 4 was asked if he knew of any companies using excel alone to manage this transition? His answer was short and to the point saying, yes, I’m sure there are some companies out there, however, if you have more than 3 or 4 leases, you should strongly consider software.
Action Item: If you have more than a handful of leases you need to research tools to help report and provide journal entries under the new guidance.
Take Away #5: Another popular topic that was discussed with the various controllers and chief accounting officers was how to effectively control the lease accounting data including updates and changes to the portfolio of leases, especially considering you will be relying on that data in your financial reports. SOX controls are important, and managing your lease portfolio in excel opens the door to different internal control issues.
Action Item: Make sure your process to report and be audited under the new lease accounting rules is not only sufficient but also addresses the appropriate SOX controls. It is difficult to track and manage changes in excel. Even if your company implements a new process for the lease data to ensure integrity, it will be difficult to execute simply using excel spreadsheets. In addition to that, any new process implemented will be limited to a certain group of employees forcing your company to lean heavily on one group or department within the company to manage the lease portfolio. Thank you for reading. If you want to a free step by step guide to help you prepare for the lease accounting transition, you can download that for free here.
We are also happy to show you how our processes and software can address all of the action items above by emailing info@LeaseQuery.com or simply calling us at 1-800-880-7270 to talk to one of our lease accounting experts.