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Subledger Accounting For ASC 842 And IFRS 16 Compliance

Subledger Accounting for ASC 842 and IFRS 16 compliance

A subledger is a record containing all of the details of a transaction, and rolls up to the general ledger at the portfolio level, which ultimately contributes to the quarterly or annual financial statements.

Traditionally companies maintain subledgers for accounts payable, payroll, inventory, fixed assets and accounts receivable – but formal lease accounting subledgers have not been the norm.  However, the new ASC 842 and IFRS 16 lease accounting standards require leases to be accounted for at the asset level. As part of compliance efforts, companies need to consider utilizing lease accounting subledgers to track what happens to the lease in its entirety, and each individual asset on the lease. The list of details associated with a lease can include more than 50 data points. For example, a subledger entry on a lease may include details such as the lease origination date, expense recognition, principal reduction and reclassifications.

Criteria for lease accounting software

Given the level of detail required for ASC 842 and IFRS 16 lease accounting compliance, most companies are shopping for a comprehensive lease accounting software solution. When vetting a lease accounting software solution that can serve comprehensive needs of ASC 842 and IFRS compliance plus ongoing “Day 2” capabilities, look for a vendor with experience automating lease accounting workflows to/from ERP systems to subledgers for fixed or leased assets. 

Gathering the copious amount of lease data necessary for the new standards is no easy task, and FASB recommends getting started as soon as possible. However, once the lease data is gathered, quality control measures are taken to fill in missing data gaps and accurate information is centralized, the benefits associated with increased visibility means your organization can make better-informed decisions about lease management moving forward. Learn more about CoStar’s comprehensive lease management software, lease accounting software and lease administration software.

Matt Waters, CPA

Lease Accounting Subject Matter Expert with over 15 years of Management Experience in Accounting and Finance