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#1 roadblock to completing a full inventory of leases for FASB ASC 842

Whether it’s leveraging internal questionnaires to understand the full extent of their lease portfolio across the company, how to manage embedded leases, the materiality of leases and how this process is impacting the way organizations make decisions about new leases going forward, our panelists discuss the major roadblocks to completing a full lease inventory in order to comply with FASB ASC 842.

For more insight and content along the key stages to FASB and IFRS compliance, visit Tango’s Road to Lease Compliance Resource Center.



  • George Elefther, Vice President, Real Estate Accounting – Bed, Bath & Beyond
  • Gabe Sugar, Director, Financial Planning & Analysis – Darden
  • Kevin Fossee, Director Advisory Services, Real Estate – PwC
  • Theresa Meier, Director of Accounting – Bed, Bath & Beyond
  • Rick Zelinsky, VP Product Strategy – Tango



One of the retailers in Bay area that recently implemented our application went into this looking for a system for real estate, knowing that they’re going to bring all of their non real estate leases in with really no concept of how many there were.

We’re talking a 600-700 store retailer that ended up having over 3,000 non real estate leases once they ultimately inventoried them. So I think this is not abnormal. I think there’s either businesses that do some of this as leasing activity outside of real estate….I think there’s very few that I think are in between. Either people have very few non real estate leases or they have a lot, right? Because I think it’s a bit of a strategy that they adopted as an organization. But now what it turns into is what do we do about those? We know we have to do the accounting. What else are we going to do? Are we going to be able to summarize them? Are they individual leases? How do some of these fleet leases work where cars are coming in and off every month?

A lot of what’s happening now is kind of that solutioning process and it’s not really kind of back to the interpretation. It’s not really an interpretation, but it is. There is elements of that where they’re going to order they’re saying, “Hey, could we roll all these up together and can we say it’s not material if we just on a quarterly basis make adjustments and then recalculate our financial?”.

I think those are the kinds of discussions and it was unanticipated from a level of effort that tit would take as much time. This is something that we’re seeing kind of dragged on the process pretty materially. And we’re finding people adding headcount within real estate to support that process both in the project or on an ongoing basis.


I was going to say a couple of things. We are definitely finding a lot of discovery happening of even big pools of cars and buses and shuttles and things like that. I’m surprised at some of those bigger pieces. And most of my clients, they’re doing similar type stuff, sending out the questionnaires, having the calls with the different lines of business. But the other thing we’re doing is we’re starting to put analytics on the different systems, so looking at the procurement system, looking at AP, trying to identify data attributes that would potentially exist if it were a lease contract. Right?


The leading indicator that would make it easier.


Well so two things. So one, we’re we’re looking post, right? And we’re looking at payments and is it a recurring payment, is it fixed amount? Like things like that around the system.

And then backing into what was that. But then the other piece that we’re doing from an ongoing perspective is embedding into the procurement system. We talked a little bit about procurement being involved, you know, varying levels of this, acceptance of doing this. But you know, a questionnaire before something’s procured, whether it’s through a procurement system or if a legal has a contract system that says, you know, “Is it a lease?” And then they say “No.” Right? And then you say, “Okay, no, does it have a recurring payment? Do you have, you know, is there a service or is there an asset you get?” And asking those questions.

Four or five questions, but then it gets sent over to accounting, red flag, check this out kind of thing. So that’s more of the ongoing. Analytics is the 2.0 looking at our population up front and then ongoing is kind of embedding it into the procurement process.

Audience Attendee

I’d love to pull the string a little bit on the analytics, right? So there’s a lot of compliance work that needs to get done. Have you seen very many companies look at this and say, “Hey look, this is a huge portion of my expenses that are real estate and lease related. Maybe I can get some insight analytics out of this that I might not be getting fully today”?


I think across the board companies are doing that. Regardless of this type of project, but it certainly is opening the eyes of people and just you’ve got very siloed groups doing a lot of procurement of different equipment and assets. I mean, I’ve got some clients that have floor mats and things that are now, you know, on balance sheet and whatnot. Right?

I think they are starting to make business decisions around it. I don’t think any of this work has led them to get more strategic about their real estate portfolios per se.


On equipment on the other side there’s a lot more potential strategies you can employ.

You’re not necessarily just going to go start buying all your new stores. Right? Probably not the best use of capital but in an equipment situation.


I am seeing that. There are certain pockets where we’re seeing some of the analytics kind of change some of the thinking.

Audience Attendee

Large focus is on compliance at this point but beginning to see some analytic lightbulbs go off.


Correct. And I think where, what will be interesting is even with real estate, how do we see the strategy change on lease versus buy, right? Where certain retailers have more flexibility there maybe than others. But how leases are structured going forward, you know, even from a duration to gross versus triple net leases, things like that.

So that’ll be interesting because NCREIF had a session earlier this year, which is the large re-governing body that someone joked, “Are we going to only have 12 month leases going forward?” You know, I know that this is not going to happen but it’s interesting.


Gabe, how about for you as far as inventorying of leases and then interested on equipment if that’s a bigger impact than you guys thought or that you’re dealing with?


We don’t lease a ton of equipment. I think for us the biggest challenge and what we’re trying to uncover, so many service agreements we have out there where we may have embedded leases, the soap dispensers in all the restaurants, the soda machines – that’s not the primary reason for the contract. It’s the soap and it’s the syrup usage. You know, so and then figuring out how each one of those contracts is structured, are there minimums, what’s the duration? How do you calculate, even so if it ends up meeting the lease guidance, how do you calculate some of that? We actually added a head count to my team to focus solely or primarily on these equipment embedded leases.




Well, when we did the survey and when it came back, we really don’t have many. It doesn’t seem like it’s going to be huge for us. We still got to continue to dig, but as of now, we don’t have many leases. Even embedded leases that we found so far. We could have some surprises as we go further down.


I’m curious about some of these. Are you guys putting a materiality lens to this?


It’s actually one of our open points to talk to our CFO about it. Just because some of these, you know there could be an embedded lease but you know the annual payments are less than 10,000 and are we going to spend the effort dis-aggregating between you know, the soda and the machine or … So that’s something I’m kind of trying to push for and just come up with what we would call a non-gap policy similar to like fixed assets. You would only capitalize it if it’s over a certain threshold.


What are you seeing there, Kevin?


Well I’m seeing following whatever your policy was from a fixed assets perspective, if you had a dollar threshold in there. I’m seeing that. I am seeing some of my larger technology clients that have massive balance sheets. Just “Yeah. We’re not worried about that.” Right? $50 million going on balance sheet. That’s nothing when we have, you know, $80 billion on it. So I am seeing a little looser view for some clients. And then others are even questioning whether the fixed assets policy of $5,000 or whatever is going to work for them at this point. So it’s a broad spectrum.