World-Class Lease Accounting Saves Hundreds of Hours

Accounting teams pursuing the goal of continuous accounting already know that world-class lease accounting automation saves accountants hundreds of hours each year. CoStar offers the most advanced lease accounting automation available including automated accounting controls and guaranteed managed integrations. These automations not only save time, but make for smooth sailing with audits.

One seamless solution for lease accounting and lease administration – Lease Accounting requirements drove real estate and accounting together around shared data and processes. Leases change frequently. Lease Administration and Lease Accounting both need rent amounts, payment timing and lease term dates. Accounting needs timely data, in the current period, to calculate each contract’s ROU asset and lease liability to create amortization schedules and meet ASC 842 requirements. Anytime the rent or lease term changes, accountants need to know immediately. CoStar’s comprehensive lease accounting software includes market-leading lease administration for the real estate team. Better together, the single platform prevents duplicate data entry, avoids unnecessary system integrations, and does not compromise real estate’s needs.

Fully automated lease remeasurements – Remeasurements can be a bigger headache than initial compliance, with lease changes triggering compliance-mandated remeasurements. Without fully automated remeasurements, at the lease level and at the portfolio (batch) level, accounting must create manual calculations for common lease events like renewals, terminations, and impairments. When performed in spreadsheets, each remeasurement type requires its own calculations, takes at least 30 minutes, and must be saved for auditors. This takes hours, creates controls issues, and is an audit headache. There may be hundreds of remeasurements in a year. CoStar automated remeasurements in its application, and remeasuring the entire portfolio is a single command.

Systematically controlled policy compliance and data quality – Data errors are a nightmare for accounting systems and reporting. CoStar tests individual data entries, inline in the application and bulk uploads, for errors before they become big reporting problems. For example, ASC 842 says leases with a transfer of ownership clause should be classified as a finance lease, but accountants may inadvertently tag them as operating leases. Other errors can happen by incorrectly typing or importing bad data such as numbers or text details. CoStar’s systematic controls detect and prevent errors in batch loads and in day-to-day data entry, saving accounting hours and driving accurate reports. CoStar’s solution has a standard Accounting Calculations Exceptions Report too.

Customizable reporting, company-specific fields, and ad hoc reporting – Most companies need to track information unique to either the business or industry, but many lease accounting systems don’t accommodate information outside their standard lease agreement fields; examples include livestock clauses for a tower company, appliance mezzanine square footage for a home improvement retailer, and outdoor seating for a restaurant company. CoStar provides the ability for users to easily create customized data fields alongside standard lease data for ease of access and a single source of reliable information. Ad hoc reporting on these and other fields is easy with reporting tools.

Automated reports and system-generated notes for auditors – All lease accounting solutions produce a basic lease accounting Disclosure Report, some followed CoStar in creating a Roll Forward Report too. CoStar goes way beyond the basics and provides auditable support with every report. CoStar provides the most automated disclosures, roll forwards, balance sheet reconciliations, and forecasts, because all these automatically include system-generated lease level audit details and include foreign currency conversions from local to functional to reporting currency.

Automated retrospective true-ups – Errors or omissions discovered after month-end close require manual corrections in spreadsheets when software lacks functionality to automatically fix these issues. Accountants must show the amount that should have originally been booked, the amount that was booked, and the difference between the two. This tedious process is time consuming and introduces risk with accounting records maintained outside of the solution. CoStar’s solution automatically calculates and tracks retrospective true ups, and these scenarios are inevitable for accounting teams.

Automatic matching of the incremental borrowing rate – Large companies have hundreds of borrowing rates to choose from as they’re based on geography, currency, lease term and type of lease. Without software that includes automatic matching to company rate tables, accountants must research rates and insert them manually. This is a time consuming and error prone process and can result in the misclassification of leases. CoStar’s solution automatically matches the discount rate with each lease, saving accountants hours of time.

Separable schedules for book-tax differences and other areas of accounting – ASC 842 created new intersections between tax and lease accounting. Companies often must break out lease details such as TIA amortization for tax, purchase accounting adjustments and cease use adjustments. Without the ability to easily split amortization schedules, accountants are forced to create supplemental schedules in spreadsheets. Each instance requires hours of additional work and introduces additional risk due to savings schedules outside of the lease accounting solution. CoStar has the built-in flexibility to track these components together for lease accounting while simultaneously keeping them separate for tax and other areas of accounting.

Advanced in-application help saves accounting time and helps with new staff – All solutions supply documentation, and most have it online. However, real productivity comes from multiple, easy methods for in-application help at the command level. CoStar provides a Support Center user manual, step-by-step Product Guides, a Knowledge Base of articles, and links to recent webinars all in line with the application. That means, more ways to get immediate help at the command-level in the application such as “how to” and “how do I” and videos that supply application help, best practices, and accounting guidance inline to the application. When you have new employees, or just need something fast, help is at your fingertips, saving valuable time. Of course, if you need other help, CoStar supplies market-leading Support.

Managed and guaranteed integrations with the ERP and other systems – Almost every lease requires multiple journal entry lines every period to amortize the ROU asset and lease liability balances, and to record proper expenses. The lack of integration with the ERP forces accountants to download data from their leasing software and spend hours in spreadsheets manipulating columns into the prescribed format, removing unnecessary data, adding the right cost centers and GL strings, and then uploading the journal entries. CoStar has created, delivered and supports under warranty over 900 integrations with various systems, posts to the GL automatically, and provides approvals on the GL output file release, providing accounting controls.

Market data subscription to easily estimate fair market value of real estate – The fair market value (FMV) of real estate is often needed for lease accounting calculations. FMV is needed for finance vs. operating classification testing and impairment testing and is used to determine purchase accounting adjustments in business combinations. To obtain the support for FMV of properties, companies typically go through a time-consuming process like this: Accounting requests the FMV the real estate department, which requests it from a real estate broker, who then uses researched data in CoStar to derive the FMV and sends it to real estate department, which forwards it to Accounting. Commercial real estate market data for FMVs is readily available to accounting teams from CoStar.

All of this functional automation represents CoStar’s investments and advancement toward Touchless Lease Accounting. Taken together, these automations are the most powerful combination to automate the lease accounting process. By joining the journey to Touchless Lease Accounting, companies get the highest level of automation and controls and the CoStar promise of relentless pursuit to fully automate lease accounting, allowing accounting to focus on other matters, while achieving necessary compliance.