This guide – co-authored by the former lease accounting manager with the largest home improvement retailer in the U.S. – offers Project Management, Accounting Policy and Software Product insights gained from hundreds of successful lease accounting compliance projects.
Industry experts from leading accounting and consulting firms estimate the failure rate among new lease accounting compliance projects to be as high as an astonishing 25%, based on preliminary feedback from public companies and early adopters.
The significant time investments and sunk costs of troubled adoption plans are irreversible. Many companies must now pivot and move forward on a better path toward ASC 842 and IFRS 16 adoption. Meanwhile some later-reporting public companies and numerous private companies with a December 2019 deadline are just beginning their adventure.
Over the past two years, too many decisions were made based on a confident demo and unproven project plans. Today, whether still assessing the impact of lease accounting changes or reworking a failed implementation, key decision-makers can take a more refined approach to compliance with best practices and lessons learned from predecessors.
This article shares the insights from hundreds of completed compliance projects to understand how to avoid common pitfalls, take advantage of best practices for a successful implementation and get the most out of lease accounting software. The lessons learned fall into three primary categories: Project Management, Accounting Policy and Software Product Essentials.
The project manager is vital, and the role must be clear from the outset and given the authority needed to successfully deliver. It is clear that project leaders should be empowered with the resources and decision-making authority necessary for thorough due diligence and a successful project implementation. From the start, project managers should secure the proper human resources required for an effort of this magnitude. This includes evaluating the overall HR impact and estimating the necessary adjustments to staffing/training plans. Successful implementations involve a diverse group of stakeholders across the organization.
Recording virtually every lease on the balance sheet is a complex task. Areas that have proven challenging for companies involve the nuances of transition accounting, the complexity of ongoing compliance and the impact of foreign currency.
There are many factors to consider, and companies should ensure the appropriate lease accounting expertise is available. The lease accounting subject matter expert (or team) should have an extensive understanding of the new standards and possess a deep knowledge of company-specific lease data.
Software Product Essentials:
Many failed implementation efforts include attempts to customize existing software systems or relying on vendor promises of functionality yet to be developed. And the new lease accounting requirements have generated a wave of upstarts in the lease accounting software industry. To avoid surprises that can lead to project failure, companies should strongly consider testing a mature software system, which can accommodate a pilot at any scale at little to no cost or schedule impact.
It is also important to remember companies will need to continue accounting for leases under the new standards for years to come after transition to the new accounting standards.
For details, checklists and practical advice on how to not only avoid project failure, but fully leverage this opportunity to improve business operations, download the white paper or contact CoStar for a demo.