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FASB lease accounting: 6 areas of complexity that could end in failure

 
The new lease accounting standards by the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) will require you to report in-depth lease details in financial statements.
 
In fact, the change is so significant that leases are moving from footnotes to the balance sheet. Adding leases effectively doubles balance sheet liabilities, resulting in greater scrutiny of lease management. The total possible impact for all companies: as much as $2 trillion, according to The Wall Street Journal.1

​“Everybody is looking at this standard and thinking the implementation will be easy. Once they get started, they will realize it is more complicated than it appears on the surface.”

​Ken Tysiac Journal of Accountancy

Adopting more scalable technology for managing leases can help improve compliance — but viewing compliance as merely a technology challenge is a mistake that could result in failure.
 
This compliance exercise is much more complex than organizations have planned or are anticipating. RICOH Lease Administration Services experts have identified six key points of complexity that could derail your FASB and IASB lease accounting compliance initiatives — and provide solutions to address them.
 
Attorneys looking at paperwork together
FASB/IASB lease accounting standards2
 
1. Don’t underestimate the amount of work required
 
Locating, gathering, centralizing and extracting lease data is a mammoth task. Consider the obstacles that could arise. Leases are oftentimes scattered throughout the organization. Data is likely housed in spreadsheets and disparate systems. You might not have standard lease agreements, contracts may be in different languages and some data needed to comply with the new regulations isn’t even tracked. You might need to conduct a lease-by-lease evaluation. All of these issues make the initiative time-consuming and arduous.
 
Can your in-house resources take it all on? If not, consider a partner who can help in lease accounting and administration. For example, RICOH Lease Administration Services provide data identification, extraction and legal review to locate required data in disparate systems, prepare for centralized automation and help ensure compliance.
As your business process outsourcing (BPO) partner, you have access to the people, processes and technology to get the job done. Our team, which includes attorneys, inspects lease agreements with speed and accuracy. The required information is abstracted and entered into our cloud-based system.
 
We capture data from across the enterprise and use technologies such as OCR and tagging systems to ensure lease data is accurate, consistent and optimized for search and retrieval. By uncovering manual work and replacing it with automated processes we can help increase operational efficiency, so people work smarter and faster. Your internal resources are free to focus on other priorities and revenue generating projects.
 
2. Regulations apply to all leases over 12 months…not just real estate

Real estate leases may represent only a fraction of all leases. Add in equipment, vehicles and other types of leases more than 12 months in length, and you will find hundreds or thousands are impacted by the new regulations.

Gathering and organizing documentation for all types of leases requires a collaborative cross-departmental effort with communication and standardized processes between teams. Our skilled implementation and integration experts can take the lead to connect people and information.

Our legal team has expertise in many different types of leases, far beyond real estate. They understand the legal context of leases and know how to extract the required information and help ensure all types of leases comply with new lease accounting standards.
Close up of flipping through paperwork with pen in hand
Our expertise also spans into Government Accounting Standards Board compliance (GASB) for industries such as government, public higher education and not-for-profits.

3. Gathering lease data is only the first step
 
Today, many companies are using spreadsheets to track leases, making it nearly impossible to extract the necessary data. Replacing those spreadsheets with a scalable system and a disciplined approach to lease administration management is no longer just a “nice to have” wish list item; it’s a business requirement. In fact, a PwC/CBRE survey found that almost half (43%) of respondents said they expect to implement a new lease management system to comply with the standard.3
 
Our lease accounting systems and processes reduce the number of manual touchpoints, decrease the risk of errors, integrate lease data with AP and ERP systems and improve reporting capabilities.
 
Accurate, complete data is all in one place and available for reporting, analysis and compliance. Our turnkey lease administration solution collects and integrates your lease data, automates workflows, works across platforms and helps you comply with new FASB and IASB lease accounting regulations.
 
4. With FASB & IASB lease accounting deadlines looming, time is running out
 
The 2018/2019 compliance deadlines are around the corner and there’s much work to get done. For many businesses, the new guidelines mean an organization-wide overhaul — with just months left. Now is the time to start. Even government, public higher education, non-profit and other industries with later GASB deadlines benefit by beginning the transition now.
 
The size of the initiative can put a substantial strain on in-house resources that are already stretched thin. Working with our specialized experts keeps the work on schedule and complete by the deadline.
 
With RICOH Lease Administration Services, you get a specialized implementation, data migration, abstraction and integration partner.
 
Using our proven practices and deep knowledge of lease administration, we can help you be compliant in as little as six months. Your tailored solution delivers automation, improved management and scalability.

Two men looking at tablet
5. Lease administration is not a one-time event. Consider future impact.

The work doesn’t end when the deadline arrives. In fact, it’s just the beginning. Making the necessary changes to lease administration processes now has far-reaching benefits for the future. A centralized platform and streamlined processes provide a more uniform approach to negotiating leasing terms, making this an opportune time to revisit your overall approach to negotiating leasing terms and perhaps renegotiate existing leases. Storing all lease documents in a central location and centralizing processes helps ensure control, accuracy, transparency and scalability, moving forward.

Powerful SaaS-based technology by RICOH Lease Administration Services integrates platforms and automates workflows. In addition to technology, we have specialized expertise to identify and integrate your lease information from wherever it is today into the system. With on-going support from our experts, we'll manage your new next-generation lease accounting system.
We’ll be with you throughout the FASB and IASB lease accounting compliance journey and beyond. Unlike other partners who disappear after launch, leaving you to labor through the details, we can continue to manage processes on an ongoing basis, such as: lease compilation, data identification and extraction, administration, lease administration, quarterly releases, updates, reporting and ongoing FASB and IASB lease accounting compliance support.
 
6. Don’t miss an opportunity to gain actionable insights
 
Automation alone can’t solve all lease administration issues. It doesn’t support strategic decision-making and digital transformation.
 
With a powerful lease administration reporting and analytics tools, you will be able to track lease details and have greater visibility into the impact of leasing terms on the bottom line.
 
This is an opportunity to plan your next-gen lease accounting system. Support future initiatives, with powerful reporting capabilities and actionable insights. Turn data into insights and reports for faster, better decision making.
 
However, not all technology is created equal. As important as reporting and analysis are, some systems don’t have powerful capabilities. For Ricoh, it’s an area of expertise. Our data capture, aggregation and analysis tools turn raw lease administration data into actionable insights for better business performance.
 
Dashboard capabilities enable your users to create customized views. With more 250 prebuilt reports available at no additional cost, our tool supports a wide variety of areas within your business.
 
Complexity made simple

Avoid these six roadblocks that make lease accounting management more complex. With end-to-end lease administration and compliance solutions, we can help you overcome challenges and remove the burden and cost of day-to-day management.

Delay at your own risk

Our eBook, “Quick guide to the new FASB and IASB lease accounting standards” gives in-depth details about the new compliance regulations and actionable insights on preparing your organization.
 
Heidi Grosch
Heidi Grosch has over 15 years of experience driving the evolution of Business Process Outsourcing Services, collaboration methods and the power of data and analytics. She brings a passion for learning about customer objectives and the intricacies of their challenges, identifying synergies and developing services that provide predictable and positive impact for their organizations to unleash the power of their data.
 
 

1 Michael Rapoport."Coming to a Balance Sheet Near Your: $2Trillion in Leases." Wall Street Journal, November 10, 2015. https://www.wsj.com/articles/leases-to-put-new-weight-on-corporate-balance-sheets-1447200831

2 AMTdirect. Details of FASB/IASB regulations provided by AMTdirect.

3 PwC 2017 Lease Accounting Survey: Implementation Progress Report. https://www.pwc.com/us/en/audit-assurance-services/accounting-advisory/leasing-survey-2017.html