Two important lease accounting lessons learned for private companies: Companies are usually stunned to realize just how many leases they have and how much expertise is needed for a successful implementation. Here are important lease accounting tips for private companies on setting the project up for success by getting the right data and team in place.
Lease accounting tips for data collection
Data collection for current leases has proven to be the biggest challenge for many organizations. Organizations must create a comprehensive list of all leases, and pull the accurate data values required for lease accounting calculations. Because the new standard requires new data, it’s not uncommon for data to be missing, such as real estate renewal options – even if the organization already has lease management systems in place. The agreements most often overlooked are embedded leases, which is a lease is included as a part of a larger agreement. Learn more about embedded leases here.
It’s important to push ahead on lease accounting compliance projects as soon as possible, as implementing new software with integrations to existing systems can take four to six months or more. Project managers should also take into account other factors that can impact an implementation timeline, such as the absence of personnel during holidays and vacations, year-end close efforts, internal control related compliance freezes, code freezes when IT departments restrict the implementation of new technology and other unexpected delays.
Lease accounting tips for human resources
From the start, project managers should secure the proper human resources required for an effort of this magnitude. This includes proactively taking steps to evaluate the overall HR impact and estimating the necessary adjustments to staffing/training plans.
Many companies with large lease portfolios have a dedicated lease accounting expert who have been following the lease accounting changes and anticipate the impact. On the other hand, companies with less of a day-to-day focus on lease management have assigned lease accounting to someone in the accounting department in addition to their other responsibilities. With significant compliance demands and an approaching deadline, private companies need to seriously examine whether existing accounting staff is realistic or if an additional investment in human resources is necessary.
When looking for subject matter experts, consider consulting firms and lease accounting software vendors as resources. Consulting firms have lease accounting professionals available for engagements to support existing staff with the skills needed to manage a successful lease accounting project. As you consider software solutions, ask the vendor about the qualifications of their lease accounting staff and their availability for in house or online training sessions. The best software providers also have in house CPAs and lease accounting experts. When vetting external resources, it is important to ask specific questions about lease accounting expertise and qualifications. Lease accounting is a specialized and nuanced area, and only consultants with deep experience in lease accounting should warrant consideration.