Having all lease data managed in a single system presents many benefits for ASC 842 compliance such as ease of access to a centralized source of lease data and the ability to have a global view of the organization’s obligations. Centralization also increases data accuracy and reliability in a software solution designed to better aggregate and manage lease data. But of course, the overall success of this initiative greatly depends upon the quality of the data populated into the new software system. A successful tactic is data population through a lease administration system abstract.
Background on lease accounting data population
As a result of the new ASC 842 and IFRS 16 lease accounting standards, organizations are examining their lease management practices and addressing data gaps due to incomplete or inconsistent lease information. On the heels of other accounting initiatives designed to increase transparency, ASC 842 and IFRS 16 require organizations to harness real estate and equipment lease data to make more calculations for financial reporting. The goal of the new standards was to reflect lease liabilities and corresponding assets on the balance sheet, but the exercise can also help ensure lease terms are accurate and current, verify correct payments are made or received and avoid missing critical dates.
How to tackle data migration and population into new lease accounting software
While a core internal team should be established to work on the compliance initiative, an experienced third party can (and should) be enlisted to do the heavy lifting associated with data migration and lease abstracts. When vetting potential software vendors, look for a holistic solution that offers a team of in-house attorneys, paralegals and lease administration professionals who can help achieve confidence in the quality and accuracy of critical lease data by providing management solutions for key financial and legal information. The lease data services should include:
lease abstraction with a summation of key financial, business and legal information (including unusual financial obligations, lease provisions and other issues)
data validation, with gap analysis and audit of missing or inaccurate data
high resolution document imaging and storage of legal documents for real estate and equipment leases
due diligence support for the acquisition and disposition of assets