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Lease Accounting Standards For Renewable Energy

Lease accounting standards for renewable energy

Renewable energy is an emerging industry that is very complex, changing, and a rapidly growing. The new ASC 842 compliance standards will take effect soon, and renewable energy companies face tax, audit and financial questions. From exploration and production, storage and distribution, land lease, to corporate functions the new leasing standards will require energy companies to change accounting policies according to the new principals. It may take assistance from experts in evaluating the impact on financial statements. Increased assets and liabilities on the balance sheet could also impact agreements with lenders.

The new lease accounting standards will require renewable energy investors to take note of how they have analyzed investments in the past and how calculations will be affected going forward. From rooftop and parking lot rights to leased space in the basement of multi-story high-rises, leasing opportunities raise interesting questions for lease accounting. In the renewable energy industry, locating lease contracts and identifying embedded lease obligations that reside throughout the organization presents a significant challenge. Extracting the information needed to meet the new accounting standards increases the difficulty. The need to carefully but quickly collect and validate all data and migrate it into a lease accounting system may involve a reallocation of resources.

During the implementation of new processes and procedures for lease management, it will be necessary to carefully analyze each lease for crucial information.  Owners may have hundreds of leases which will require time and resources to review and evaluate. The use of reliable lease accounting software will assist with these areas. The overall effect the new standards pose on renewable energy is challenging, but the general feeling among experts in the field remains very positive for the industry. How can lease accounting software help? Among other things, it can provide the platform to test various leasing scenarios without every disturbing your live data. Powerful information customized to your exact specification can prevent mistakes and support better business decisions. CoStar offers the lease accounting software-as-a-service (SaaS) for Enterprise Lease Accounting proven to be the safest, most straightforward, fastest, and the most accessible path to compliance with the new lease standards.