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SAP® Lease Administration and Compliance with New Lease Accounting Standards

What You Need to Know Now

Copyright © 2017 Nakisa Inc. - Bramasol Inc. All rights reserved. 2

Table of Contents 2

Executive Summary 3

Overview of Leasing Challenges & Opportunities 4

Why New Standards? 5

Lease Administration Requirements 6

SAP Real Estate Lifecycle Management 7

SAP Lease Administration by NAKISA® 8

Leveraging a Comprehensive Approach to Lease Management 10

The Next Steps 12

About Bramasol, Inc. 13

About NAKISA® 14

Table of Contents

Copyright © 2017 Nakisa Inc. - Bramasol Inc. All rights reserved.3

Executive SummaryIn 2016, the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) issued new standards for lease accounting: IFRS 16 & ASC 842, which must be implemented by 2019. Both IFRS 16 and ASC 842 are the result of a joint effort between the IASB and FASB to meet the objective of improved transparency, comparability and financial reporting. These changes will impact virtually all companies, whether lessors or lessees.

This eBook provides an overview of what companies need to know now and what actions you should be undertaking now to assure compliance with the new standards and to improve your overall company-wide lease management capabilities in the process.


Overview of Leasing Challenges & OpportunitiesThe International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) have issued new requirements for lease accounting, IFRS 16 and ASC 842 that are intended to further the goal of improved transparency, comparability and financial reporting.In addition to presenting a new set of challenges that need to be addressed by the end of this year, the changes in lease accounting also offer an excellent opportunity for companies to make major improvements in their end-to-end lease management practices.

All companies, whether lessors, lessees or both, need to leverage the process of changing their lease management methodologies. This will enable them to gain better visibility of their lease portfolios, streamline the process of lease management and reduce overall costs.

The opportunities for significant improvements span all lease categories, including:• Real Estate Leases• Equipment Operating Leases• Software Leases

As long-term innovation partners with SAP, Bramasol and NAKISA® have brought together a comprehensive set of solutions and expertise to help companies assess and prepare for the new FASB and IASB leasing standards. These solutions unify disparate leasing data and provide enhanced visibility for companies to make informed decisions on their lease portfolios, assets and liabilities while conforming with the new requirements.

The following sections drill down for a look at the new standards’ rationale and impacts, with a focus on exploring the specific solutions available and the comprehensive project roadmap needed for successful transformation of corporate lease administration.

Solutions Knowledge

Processes Experience


Under previous accounting practices, lessees were required to classify each lease as either a finance or an operating lease. If a lease had been classified as an operating lease, then the lessee would not have shown the liability in their balance sheet. Only the periodic lease payments would show up as an expense in the company’s income statements.

This presented problems with lack of financial transparency, especially for non-cancellable operating leases, which represent significant liabilities that essentially were hidden from disclosure in balance sheets.

The absence of information about operating leases on the balance sheet meant that investors and analysts did not have a complete picture of the financial position of a company, and were unable to properly compare companies that borrow to buy assets with those that lease assets.

Given the large number of operating leases that exist among companies around the world, the aggregate magnitude of these undisclosed liabilities is huge.

The new IFRS 16 and ASC 842 standards are designed to remove these discrepancies by requiring that most leases be shown on company balance sheets.

The timeframe for understanding and implementing changes to meet the new standards is rapidly becoming a critical factor for successful compliance.

The effective date for IFRS 16 is January 1, 2019 (early adoption permitted) and the effective date for ASC 842 is the next fiscal year after December 15, 2018.

Why New Standards?

In 2005, the US Securities and Exchange Commission (SEC) expressed concerns about lack of transparency of information about lease obligations, reiterating concerns already expressed by investors and others.

Listed companies using IFRS or US GAAP disclosed almost $3 trillion of off balance sheet lease commitments in 2014

“Some of America’s best known companies – names such as AT&T Inc., CVS Health Corp. and Delta Airlines, Inc. – likely will have to effectively boost the debt that they report on their balance sheets by tens of billions of dollars.

The total possible impact for all companies could be as much as $2 trillion.”

Wall Street Journal - Nov. 11, 2015.

If you lease, regardless of your company’s size or industry, under the new standards your balance sheet will be different. Now is the time to prepare for these changes.Your company might not be prepared for the transition to new accounting standards due to lease data dispersed across your organization. Since it is often collected by different people using different processes and mechanisms, there can be a significant variation in the quality, integrity and relevance of this data across multiple information sources. These challenges grow exponentially as lease portfolios globalize, creating a significant risk of regulatory non-compliance, as well as inaccuracy in reporting at large companies.


For most companies, the scope of lease administration spans four major areas, depending on whether the company is a lessee, lessor, or both. As shown below, these include the following use cases:

1. Lessor: property/non-movables. The use case here is commonly subtenants in real estate.

2. Lessor: equipment/movables, such as cars, planes, mobile phones, equipment, etc.

3. Lessee: property/non-movables. Virtually all companies have real estate leases for offices, facilities, land and/or infrastructure.

4. Lessee: equipment/movables, such as computer equipment, production machinery, cars, planes, mobile phones, software licenses, intellectual property rights, etc.

These last two areas are where most companies, as lessees, will see the greatest impacts from the new standards, which will require changes to how they collect, manage and report lease information.

Use case number 4 (below) is perhaps the most challenging because of the wide range of lease contract scenarios (phones, cars, etc.) and the legacy practices in many companies of letting these types of leases be handled and managed by dispersed business units.

Lease Administration Requirements

The following sections discuss specific solutions by SAP and NAKISA® that focus, respectively, on addressing the real estate management and operating lease administration challenges faced by lessee companies in quadrants three and four above.


The SAP Real Estate Management solution is a fully integrated subcomponent of SAP Finance that provides a simplified approach to the leasing solution landscape by elimination of complex financial interfaces, reduction in the number application and real time valuation of finance leases.

By sharing a common platform, SAP Real Estate Management eliminates the problem with operational silos between key functions.

SAP Real Estate Lifecycle Management

The leasing function is an integral part of SAP’s real estate solution that covers the entire lifecycle for corporate real estate organizations across the 5 primary pillars of commercial real estate management.


SAP Lease Administration by NAKISA® is an end-to-end lease accounting solution that provides access to company-wide lease data, with the visibility and traceability needed to support and comply with the new regulatory standards.

SAP Lease Administration by NAKISA® is the result of many years of co-development between SAP and NAKISA®, collaboration and consultation with key expert accounting partners, and rigorous testing through the SAP Premium Qualification process. As a certified Solution Extension, SAP Lease Administration by NAKISA® goes through SAP’s strict Premium Qualification program which, among others, tests and certifies the solutions for security, performance, supportability, accessibility and documentation.

SAP Lease Administration by NAKISA®

By providing a single point of entry to collect and validate the contractual attributes of leases and assets, SAP Lease Administration by NAKISA® provides visibility into a companies’ lease exposure to optimize assets portfolio management and supports accounting processes for more efficient cost controlling and regulatory compliance.

SAP Lease Administration by NAKISA® creates a unified leasing contractual data repository that can be accessed to leverage accurate and relevant data for the optimization of not only the leasing accounting processes unique to your business, but also transactional processes such as equipment, supplier management, business planning, and more.

To support lease accounting for regulatory compliance and drive more efficient cost controlling, companies need clear visibility into their global lease portfolios. This includes visibility into composition, key lifecycle dates, value of leased assets, responsible org units, and more.


Achievement of this objective must begin with a unified database of lease data. By bringing the entire ecosystem of leasing data within a single unified system, SAP Lease Administration by NAKISA® empowers businesses to efficiently streamline, trace, and integrate all the data on new, past and future leases.

SAP Lease Administration by NAKISA® has five major components, which are designed to manage the complexity of the lease contract administration.• Planning and Budgeting: Define and achieve the company’s strategic outcomes and priorities

in terms of equipment leasing.

• Data Capture & Accounting Calculations: Consolidate lease information, to calculate Lease Payment Schedule and to do the required contract classification.

• Equipment Tracking: Enable users to be informed with full visibility in terms of equipment installation, usage and casualties throughout the equipment lifecycle.

• Payment processing: Create the appropriate accounting entries required by the Accounting standards so to satisfy disclosure requirements.

• Event Management: Keep track of and make course corrections based on contract lifecycle events; equipment lifecycle events and Lease Payment Schedule events.

This integrated architecture for lease administration enables companies to visualize their global lease exposure at a glance on an intuitive dashboard that breaks down the composition of all assets, including contract portfolio key dates, the value of leased assets and responsible organizational units.


Companies also save on time and costs by centralizing all lease data in one single repository. With the mass importing and field mapping capabilities, SAP Lease Administration by NAKISA® also support quick importation and integration of data from thousands of contracts from various sources.

This centralized solution for end-to-end lease management, lease accounting & compliance, and analytics & reporting provides an excellent foundation for meeting the requirements of the new IFRS 16 and ASC 842 standards. The key elements include:

End-to-end Lease Management

• Designed to provide visibility into lease exposure for assets and equipment

• Unification of data in a single repository

Lease Accounting & Compliance

• Full lease accounting capabilities from classification, accruals, and payments to disclosure and reporting

• Built for compliance with current and new leasing standards (IFRS 16 & ASC 842)

Analytics & Machine Learning

• Disclosure reporting for capital and operating leases

• A complete view of global lease portfolio from multiple perspectives

Leveraging a Comprehensive Approach to Lease ManagementWith implementation of new accounting standards for leasing in 2019 fast approaching, there is no time to waste in getting started.

As an experienced SAP Gold Partner and leading innovator in the financial management arena, Bramasol can be your guide, implementation partner, training resource and on-going coach throughout the entire process to assure a well-controlled and successful transition to the new standards and a comprehensive lease management program. Bramasol also brings broad business analysis skills, deep implementation expertise and change management capabilities to understand and meet both the short term and long term needs of our clients.

Using a proven approach to strategic change implementation, the overall roadmap for leasing compliance would include these key stages.

11

The typical leasing implementation project is comprised of two parts: 1) non-movable real estate leases and 2) moveable leases. As a co-innovator with SAP and a primary partner with NAKISA®, Bramasol is expert on installing, configuring, optimizing and supporting both SAP Real Estate Management and SAP Lease Administration by NAKISA®.

We suggest you start with an assessment phase, understanding the complexities of your leases, where are they stored, and/or how many of them are actual leases. Our team can help you perform this assessment phase.

Once we perform the assessment, we put together an implementation roadmap highlighting the quick wins showing how your leases will look like in SAP FX-REM and or SLAN.

Proven out over many projects, the Bramasol implementation process involves four critical phases, as shown in the high-level timeline and roadmap below.

This process can also include defining a Proof of Concept (POC) early in the project scoping and realization steps to model a portion of the solution set in a real-world environment. This POC approach has proven to be a valuable tool for achieving quick feedback and understanding of the target company’s unique situation and data set, thereby heading off many potential problems before proceeding with wider implementation processes.

High Level Implementation Project Phases and Timeline

Key activities & deliverables:

• Identify Key Stakeholder

• Conduct Group Interviews

• Identify and Define System Landscape

• User Requirements

• Kick-off Deck (Deliverables)

• High Level Implementation Plan (Deliverables)

• System Roadmap (Deliverables)

• Project Test Plan (Deliverables)

• Define Data Migration Strategy (Deliverables)

• Define Training Strategy (Deliverables)


• Identify Business Discovery and Technical Design Walk Through

• Design Technical Configuration (Deliverables)

• RICEF Design and Delivery (Deliverables)

• Identify Gaps in the Process and System (Deliverables)

• Unit Test, Regression Test Scenarios and Scripts (Deliverables)

• Design Data Migration (Deliverables)


• Defines Cutover Activities, Manual and Automated

• Identify Key Stakeholder Communication

• Secure Gate Approval

• Iterative Business Discovery and Technical Design Walk Through


• Release Transport

• Support Business and IT Resources

• Identify Performance and Process Improvement Areas

• Provide KT to Support Team

• Provide Assistance During First FY Closing and Transition Process During Go-live


The Next Steps:

In short, the most important step right now is to Get Started!

If your company is like most other organizations with numerous disparate leasing activities, you are probably already spending a significant portion of your revenue on unnecessary payments, penalties and the price of inefficiency.

By starting a project now to undertake comprehensive integration of your overall corporate leasing program, you will likely see major returns on your investment even before the new standards take effect. Also, by starting now to establish a unified, highly-integrated, traceable and easy to manage solution set for all your corporate lease data, you will lay the foundation for seamless transition to the newly mandated lease reporting requirements.

The bottom line is: “Save costs today – Assure Compliance Tomorrow”


About Bramasol, Inc.Bramasol is the leader in SAP Leasing, Revenue Recognition and Office of the CFO Solutions

Bramasol is the Leasing leader and a recognized SAP Leasing services partner for companies seeking to comply with and benefit from the new Leasing standards. Our SAP-certified experts, partnering with SAP and NAKISA®, have lead the way in education and enablement of the new Leasing standards. Even before the announcement of the new IFRS 16 and ASC 842 standards, Bramasol was working to educate companies on the coming changes and how to leverage the existing Revenue Recognition work to help with compliance. Our industry leading experience and focus on Office of the CFO solutions, enables our customers to ramp up quickly and evaluate the options to not only comply with the standards, but transform finance during the process.

Bramasol is also the Revenue Recognition leader and a recognized SAP Revenue Recognition services partner for companies seeking to comply with and benefit from the new Rev Rec standards. Our SAP-certified experts, partnering with SAP, assisted in the majority of SAP Revenue Accounting and Reporting Ramp-Up projects. Driving successful workshops, Proofs of Concept, and implementation projects throughout the U.S., Bramasol is the go-to partner with the experience and expertise for companies wanting to leverage SAP Revenue Accounting and Reporting to comply with ASC-606 and IFRS 15.

Currently, Bramasol is performing implementations and Proofs of Concept/Pilots for additional clients; proving that Bramasol is a go-to partner with experience and expertise for companies wanting to utilize SAP Revenue Accounting and Reporting to be compliant with the Financial Accounting Standards Board (FASB) current US Generally Accepted Accounting Principles (GAAP) revenue recognition standard or the newly announced ASC-606 and International Financial Reporting Standards (IFRS) 15 addressing the “Revenue From Contracts with Customers”.

Whether you are looking for a SaaS, hosted or on-premise solution, Bramasol has worked with over 150 clients to solve business challenges using SAP solutions including SAP Business Suite, SAP Business All-in-One, SAP Business Intelligence solutions, SAP Business ByDesign®, the SAP HANA® platform and mobile solutions. If you are looking to build a platform for growth or just be “Rev Rec Ready”, contact us and we can help.

Contact Information:United States – Headquarters Bramasol, Inc.3979 Freedom Circle, Suite 620Santa Clara, CA 95054Toll Free (866) 625-9878Phone +1 (408) 831-0046Fax (408) [email protected]


About NAKISA®

NAKISA® Inc., a recognized leader of data management and visualization solutions for SAP®, helps customers better manage, track and validate their lease-related data to reduce spending, improve efficiency and ensure compliance to upcoming regulatory changes.

SAP® Lease Administration by NAKISA® provides visibility into a corporate portfolio of leased assets allowing SAP customers to optimize the management of their global assets while supporting accounting processes for more efficient cost controlling and regulatory compliance. It also enables customers to prepare for the upcoming changes to lease accounting standards as defined by the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB).

NAKISA® continually collaborates with SAP to co-develop integrated solutions that extend the value of SAP customers’ existing investments. An SAP partner since 2007, NAKISA® has over 3.4 million users in 700 enterprises across 24 industries worldwide. SAP® sells, tests, and supports SAP Lease Administration by NAKISA®

Contact Information:NAKISA® Inc.733 CathcartMontreal, QuebecCanada, H3B 1M6Phone: +1 (514) 228-2000info@NAKISA®.com

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