Develop a strategy to most efficiently and effectively approach this change across your organization.
Understand the implications and impact of the new regulations.
Locate and assess all lease contracts to ensure they are classified properly.
Follow a strategic process to ensure data completeness and quality.
Ensure seamless compliance to the new accounting standards by selecting the right system.
Identify, analyze and improve upon existing business processes within your organization.
Assess current reporting and disclosure practices and establish new controls.
Operationalize changes to ensure a permanent shift.
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The new standards have broadened the definition of a lease and companies are finding there is much more to the process of inventorying leases than meets the eye. Step one is to find all contracts across the enterprise, which is no small task given many are buried in different departments, filing cabinets, spreadsheets, or are managed by external third parties. Step two requires the development of a methodology to assess contracts and classify them, another daunting task. Making sure you have a comprehensive approach and structured process is the difference between spending weeks versus months in this stage of the Road to Compliance.
Calculations under the new standard can require up to 75 different data elements across all types of leases – including real estate, equipment and embedded. Historically, most organizations have focused solely on real estate leases, and current systems do not capture potentially thousands of non-real estate leases, resulting in a massive data gap. Following a five-step process to data management with a focus on data quality is the only way to successfully navigate this stage of the Road to Compliance.
With change comes opportunity, and this lease accounting standards update is no exception. Take time to assess the solutions available to you. While many vendors are pursuing a patchwork approach to claiming compliance with the new standards, others have solutions that have been built from the ground up and are third-party verified to ensure it. Since any decision you make will involve a project not dissimilar to a full re-implementation, you have a unique opportunity to reassess the capabilities, limitations and costs of your current system and service provider.
You have met the deadline, and everyone has breathed a collective sigh of relief. Now it’s time to consider the future. It’s not enough to comply once and go back to business as usual. Your organization must institutionalize these changes to ensure they represent a permanent shift in the way to account for leases. Understanding new responsibilities and collaborations are keys to ongoing success. Put processes in place to monitor compliance to ensure you are on course – and be ready to take corrective action if you are not.