ASC 842 and Lessor Accounting: The Adoption Clock Is Ticking
Technology Leads the Way With the New Lease Accounting Guidance
Lease accounting has never been a walk in the park. While Embark isn’t exactly saying it’s the financial equivalent of digging massive ditches in the compacted earth, its many moving parts certainly make it ripe for efficiencies wherever and whenever possible. As lease accounting becomes even more involved or, more precisely, complex due to the new standards set for in ASC 842, companies now need effective solutions to streamline their lease accounting and add value rather than devote even more resources to their lease accounting procedures.
As is often the case under such circumstances, technology has a way of providing companies with new solutions to lingering issues. Although Embark stops just short of calling technology a company’s knight in shining armor when it comes to adopting the new lease standards -- ahem, we’re not exactly chopped liver with our fantastic ASC 842 guides for lessors and lessees -- new platforms can certainly provide significant benefits that simply aren’t attainable elsewhere. If we’ve managed to successfully pique your interest, read on for our thoughts on lease accounting software as well as our preferred solution.
Technology Should Provide Efficiency
Many of the issues facing firms and their lease accounting procedures stem from the nature of the process itself. Please note how we said many, not all of the issues. ASC 842 has added a wrinkle or two that require a thorough understanding of the new standards as well as effective solutions to address the additional requirements. However, your lease accounting doesn’t have to occupy fleets of noble-minded accountants for you to successfully transition to the new standards.
As you might have guessed, this is where technology enters the fold, not as a magical salve to your lease accounting but as a potentially significant tool in helping you absorb ASC 842’s jabs without so much as a wince. Just remember that not all software-based solutions are the same so firms must take a thorough, organized approach to their search for the platform most appropriate to their particular needs.
First and foremost, any solution must afford a greater level of consistency for both operating and finance leases across a single platform, eliminating the splintered, segmented ineffectiveness of multiple platforms struggling to communicate with one another. Such consistency is, by far, the most significant source of added value a platform brings to a company’s lease accounting.
Of course, just like any technology, even the most efficient, effective solution only reaches its full potential when an organization implements it properly. Like all the other technologies Embark has spoken of in the past and will discuss in the future, no platform, even the most innovative, will fulfill expectations unless it’s a good fit to start with, offers needed functionality, and integrates with an enterprise’s systems. Any technology, lease accounting software included, should be able to mold itself around your organization and needs, not the other way around. To that point, the following are all critical factors to look for when choosing between lease accounting platforms:
- Solid structure around internal controls
- Integrates with ERP systems
- Collects, abstracts, and reconciles data for leases
- Lease term management to preserve administrative resources
- Standardization of processes, including lease/buy analysis
- Fee reductions for evergreen leases
A Sound Choice
Naturally, a lease accounting platform should meet many different criteria for an enterprise to consider implementing it. While there are a handful that at least come close to such lofty heights, Embark feels comfortable only recommending a single solution -- LeaseAccelerator. Given our well-known agnosticism to technologies and even vendors, our recommendation rightfully comes with a significant level of confidence and admiration in LeaseAccelerator’s forward-thinking solution set.
As you’ll see, aside from meeting all the above-listed criteria, LeaseAccelerator also has a few other unique attributes that make it stand out from the pack. Their cloud-based platform is the only one in the marketplace that allows companies to comply with the ASC 842 mandate of maintaining financial reporting that meets both the old and new standards, automating the entire process to eliminate the more laborious approach adopted by every other platform available. In fact, LeaseAccelerator lets you maintain as many versions of your reporting as you wish, again automating the process and freeing up resources better devoted elsewhere.
LeaseAccelerator also offers their Enterprise Lease Sourcing system as an optional companion piece to their main platform. Essentially an eBay-type of a marketplace for your equipment leases, this software can quickly generate a lease RFP and then distribute it across their global network of lessors to help you get the best financing rates and contract terms possible.
Lease accounting is complex and dynamic, requiring constant attention and a meticulous eye to maintain success. Even with the additional demands brought along by ASC 842, enterprises can still realize significant efficiencies when implementing the right lease accounting software. You know what our choice is, but of course, we always suggest you perform your own due diligence, understand both your needs as well as the strengths and weaknesses of the different solutions available, and make a well-informed decision. And yes, it should go without saying that Embark’s ever-growing team of industry experts is here to help you with the process whenever and wherever needed. It’s what we do, and we’re not too shy to say that we’re darn good at it.