how leaseaccelerator makes it easy to transition to the new … · 2020-04-14 · standard on time...

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How LeaseAccelerator Makes It Easy toTransition to the New Lease Accounting

Standard On Time

It’s now official: The first deadline for transitioning to the new lease accounting standards as dictated by IFRS 16 and FASB ASC 842 is less than one year away.

According to the recently announced final FASB standard, the deadline for income statement comparables is January 1, 2017. This will soon be followed by a January 1, 2018 deadline for balance sheet comparables and a January 1, 2019 implementation date for the new standards.


These new capital lease accounting standards will require companies to transfer their operating leases onto their balance sheets beginning in 2019. Currently, leases need only be disclosed in the footnotes of companies’ financial reports.

MILESTONE FIRST DEADLINE

Implementation Date

Balance Sheet Comparables

Income Statement Comparables

1 January 2019

1 January 2018

1 January 2017

The impact of the new lease accounting standards will be huge: According to the International Accounting Standards Board (IASB), listed companies worldwide currently have approximately $3.3 trillion in leasing commitments. More than 85 percent of these commitments do not appear on these companies’ balance sheets.

Companies with large operating lease obligations will be impacted the most by the new standards. These companies’ off-balance sheet leases can range from as little as a few million dollars to as much as tens of billions of dollars.

$3.3 Trillion in leasing

commitments.

More than 85%

of these commitments do not appear on these

companies’ balance sheets.


During the development of the new lease accounting standards over the past decade, there was plenty of analysis and debate about how the new standards would impact lease vs. buy decisions and change credit ratings. However, nobody thought much about the additional administrative burdens companies would face in redesigning their lease accounting processes.

LESSEES’ CHALLENGES IN MEETING THE DEADLINES

To avoid a significant deficiency or material weakness, companies will need to adopt new strategies, policies and software in order to maintain complete, accurate and up-to-date lease information. Unfortunately, many companies are woefully unprepared for these requirements — even with the first new lease accounting standard deadline less than one year away.

Here’s the problem: Many global companies that lease equipment all over the world use spreadsheets and email to track their leases and assets. However, most corporate finance executives know that spreadsheets alone are not enough to meet the new lease accounting standards’ compliance requirements.

Instead, fiduciaries will need to adopt a scalable, enterprise software solution to ensure the accuracy and completeness of their accounting and public reporting. Most importantly, they need to do so well in advance of the 2019 implementation date in order to provide comparable statements for several prior years, as required by the SEC.


LeaseAccelerator, a suite of lease accounting software services designed specifically for equipment lessees, is the best solution for helping companies with large operating lease obligations meet the challenges posed by the new lease accounting standards.

There is no other solution on the market that will enable lessees to meet the new lease accounting standard deadlines while sustaining the processes, controls, accuracy and completeness of data across the enterprise.

THE SOLUTION: LeaseAccelerator

In addition, lessees can save up to 7 percent on lease sourcing and from 10 percent to 12 percent at the end of the lease term by using LeaseAccelerator.

BESTSolution to meet new

lease standard

UP TO 12% savings at the end of

the lease term


THE DIFFERENCE BETWEEN EQUIPMENT AND REAL ESTATE LEASES

LeaseAccelerator is designed specifically to manage lease accounting information at the asset level across the enterprise, unlike real estate lease management software

platforms or spreadsheet-based “transition” tools offered by consulting firms. Asset-level information changes on a daily basis but these changes are often known by just a handful of geographically distributed stakeholders. With LeaseAcclerator, you can capture these changes with powerful asset-level notification and attestation tools that are methodically deployed to each stakeholder in your leasing process.

EQUIPMENT REAL ESTATE

LESSEE

LESSOR

Equipment Lease Management

Software-as-a-Service (SaaS)

Installed, On-Premises

Integrated Workplace Management Software (IWMS)

Installed, On-Premises

Using these tools enables you to manage any mid-term or end-of-term event over the term of a lease. This includes capturing any asset-level scenario — including partial buyouts, renewals and returns

— on the same schedule. With this asset-level database, you can apply different economic lives, depreciation and amortization for each asset on a schedule as required, which is critical to meeting the requirements of the new lease accounting standard. You can also manage any asset-level changes in location or business coding. In addition, LeaseAccelerator makes it easy to manage changes in personnel and update your corporate hierarchy at any time.

These capabilities are simply not possible with traditional real estate lease management software or a static spreadsheet-based tool. Real estate lease management software is focused on the management of building leases by just a couple of people in a real estate department. Managing building leases requires a significantly different workflow, tools and underlying data model than managing equipment leases. And while spreadsheet-based transition tools may provide a mechanism for capturing data, they can’t be deployed in a production environment as an integrated lease accounting subledger to manage a leasing program. This is because they can’t scale and are limited to a single purpose (the transition itself).


EQUIPMENT VS. REAL ESTATE LEASES

EQUIPMENT REAL ESTATE

Dollar Value 35%

95%

Dollar Value 65%

5%Number of Leases Number of Leases

LeaseAccelerator enables you to manage and maintain the accuracy and completeness of millions of rows of leasing data by thousands of stakeholders around the world. This is the core capability required for consistently generating accurate accounting and financial reporting for an equipment lease portfolio.

The asset-level tools and capabilities of LeaseAccelerator

make it easy to reconcile your portfolio step-by-step at

the asset level on a monthly basis and produce auditable

financial statements with data that you trust – under both

the current lease accounting standard and the expected

new standard. By adopting LeaseAccelerator, you can

remove the uncertainty of transitioning to the new lease

accounting standard and continue to use equipment

leasing as a strategic tool for your business. With

LeaseAccelerator, you can:

Prompt and inform your stakeholders

Improve return performance

Optimize the economics of your portfolio

Quantitatively measure the savings and other benefits of leasing.

During the transition period to the new lease accounting standard, you can provide management with the tools needed to understand the financial impact of the changes in their financial reporting (statements and ratios).


IMPROVE LEASE PORTFOLIO MANAGEMENT USING AUTOMATED NOTIFICATIONS

Lessors earn a substantial portion of their profits at the end of the lease term when lessees miss their notice requirements, fail to return the equipment on time, continue to pay monthly invoices beyond the term, buyout the lease for more than the fair market value, or extend the lease. LeaseAccelerator’s portfolio management capabilities are designed to prevent these cost leakages unless the authorized stakeholder explicitly decides not to return the equipment.

With LeaseAccelerator, you can easily capture your

end-of-term (EOT) options from the lease and then

configure automated notifications to ensure that the

appropriate stakeholders are notified before the EOT.

You can manage the frequency of the notifications

and the economic analysis of the EOT options

provided with notifications. The reporting enables

you to manage all of the assets and stakeholders and

their EOT decisions and follow-through status so you

can focus on managing the exceptions.

STRAIGHT THROUGH PROCESSINGEquipment Leasing Data

• Moves• Adds• Changes

• End of Term • Origination Data & Documents

Lessor Accounting Systems

• Journal Entries• Amounts Due• Allocations

ERP Applications

• Corporate Hierarchy• General Ledger Codes• Cash Disbursement Info

• Upgrades• Moves• Adds• Changes

• End of Term• Returns• Buyouts• Renewals

Asset Management

Procurement Applications

• Purchase Request • Purchase Order

• Cost Center• Governance


In addition, you can provide stakeholders with details about their performance and its economic impacts on the company (these are called “Stakeholder Scorecards”) so they can change their behavior in order to save the company money.

The result: Your firm will improve its return performance and generate substantial savings in the process — typically from 10 percent to 12 percent or more of your annual leasing volume.

Competitive SourcingLease Versus Buy AnalysisRFP Preparation & DistributionAnalysis of Pricing & Terms

Contracting & BookingCapturing Schedule and asset dataAbstracting end of term optionsLoading Data and Documents

Portfolio ManagementTracking leases, assets, users, lessorsCapturing movers, adds, changesMonthly reconciliation with each lessor

End of Term ManagementEnd of Term notificationsReturn, refresh, renew, buyout decisionStakeholder scorecards

Lease AccountingMonthly close integrated with ERPAP & General Ledger reconciliationRoll forward reporting

Reporting & AnalyticsPublic financial reportingPortfolio & asset-level reportingInternal controls reporting

LeaseAccelerator also helps you standardize, document and communicate corporate policy, which helps you enforce compliance procedures for your equipment leasing process. It provides complete traceability of all people, events, documents, data and communications for every transaction. LeaseAccelerator’s portfolio management and lease accounting features help you improve your adherence to:

The result: You and your stakeholders (both internal and external) get complete and accurate data you can trust — data that is reconciled to the documents and fully auditable.

LIFECYCLE OF AN EQUIPMENT

LEASE

» Master Lease Agreements

» FASB/GAAP

» International standards such as CICA/IASB/IFRS

» Sarbanes-Oxley

» SEC

» SOX COSO

1 2

3

45

6


LeaseAccelerator has been in continuous development supporting Fortune 500 global equipment lessees since 2009, and it includes access to The Global Lessor Network (GLN), standardized lease contracts, expert support and outsourcing services. It offers lease accounting features that make it easy for equipment lessees to transition to the new lease accounting standard. This includes generating financial reporting for both the current and new lease accounting standards side-by-side throughout the transition process.

LeaseAccelerator is used today by a wide range of global companies to manage, control and account for their equipment leasing processes and portfolio. These companies include large manufacturers and high-tech firms such as Allegheny Technologies, Cisco, Cummins, Eaton, NetApp and Salesforce.com.

The Best Lease Accounting Solution for Equipment Lessees

LeaseAccelerator makes it easy for you to manage the lifecycle of leases, assets and lessors. You can:

Centralize all documents and data

Control your processes of sourcing lease capital and booking transactions

Track changes during the lease term

Manage end-of-term at the asset level

LeaseAccelerator includes highly configurable workflow and tools for lease vs. buy analysis, portfolio management, stakeholder

performance management, accounting, and financial reporting. It also integrates with procurement systems (including iProcurement

and Ariba) and ERP applications (including SAP and Oracle) and serves as a lease accounting sub-ledger, generating debits and credits

at the asset, schedule and portfolio levels.

To learn more about how LeaseAccelerator can help your company improve lease portfolio management and meet the challenges

posed by the new lease accounting standards, visit www.leaseaccelerator.com.