Each year, lease accounting teams spend hundreds of hours searching for the appropriate discount rate for new leases, renewals, and modifications. With an estimated 25% of commercial leases up for renewal annually and new leases being added to a company’s portfolio, accountants are required to continually reach out to the company’s treasury department to ask for the latest discount rates based on geography, currency, lease term, and type of lease to determine the appropriate rate for each lease.
Both ASC 842 and IFRS 16 require discount rate matching to measure a lessee’s liability. The most commonly applied rate for lessees under the standards is the incremental borrowing rate (IBR). Based on a rule a business sets in advance, CoStar automatically matches the correct discount rate to the lease and inserts it into the correct lease record.
The best practice is for the treasury department to periodically update a list of borrowing rates. That list just needs to be uploaded into CoStar’s lease accounting software, which will then automatically assign the correct discount rate to each lease based on the criteria in the tables.
In one year, a company with 1,000 leases might need to insert a discount rate 300 times — 200 times for renewals and 100 times for other remeasurement events. And that doesn’t even account for new leases, which all also need a discount rate. Accountants have more important tasks at hand than to individually insert all those rates. CoStar’s lease accounting discount rate matching alleviates the need to ever enter a discount rate manually.
If your existing lease accounting software is missing these essential, time-saving functions – or if you’re looking to implement the company’s first solution – get the system that can do all this and more. CoStar.
Lease accounting software from CoStar is trusted and recommended by more leading accounting firms and service providers to manage and report on real estate and equipment for compliance with ASC 842 and IFRS 16 guidance. If your lease data is already in a database, upgrading is easier than you’d expect.