The deadline for complying with new FASB and IFRS lease accounting standards is drawing closer. While organizations grapple to get compliant, many have yet to think about what processes and controls they need for their leasing operations and data to stay compliant beyond January 1, 2019.
Compliance alone is not enough. Your company needs the ability to continuously update its lease accounting system with the most accurate and complete leasing information.
Design the right process: Process design is often considered a scientific endeavor. Adopting the right approach can be the difference between success and failure. Between meeting your goals and fire-fighting chaos. Processes must be documented at the right level of detail, including controls, performance indicators, best practices, and responsibility, etc. And they should become standard operating procedures throughout your operations. Get the process design right and you can focus on how your people, process, and technology can support the outcomes you want.
Automate data collection: Most lease accounting data is in master lease agreements and schedules, which means extracting it can be time consuming. By automating the data flow from your internal systems, such as procurement and contract management systems, and using machine learning technologies to extract information from unstructured data sources, such as PDF contracts, you can centralize all your data, save time, and cut errors.
Collaborate and integrate: The data you need lives in many different systems and functions, such as accounts payable, procurement, real-estate administration, IT asset management, and fleet management. Collaborating with all these groups and tapping into the technologies they use is a must.
Bring in the experts: Embedded leases are different from traditional leases in the way they are written. Similarly, sale/leaseback transactions require a broader set of considerations than a typical lease. To navigate the complexity, appoint lease contract analysts to review and calculate what you must report.
Eliminating/minimizing unnecessary costs from not taking timely action on leases that are about to expire or come up for renewalMany companies are investing their efforts in preparing the financial reporting information they need to comply with the new standards by the deadline. However, by taking a broader view of your leasing process, you can deliver benefits that add value to the business as a whole, not just keep the regulator from your door.