Strategy

Develop a strategy to most efficiently and effectively approach this change across your organization.

Policy

Understand the implications and impact of the new regulations.

Inventory

Locate and assess all lease contracts to ensure they are classified properly.

Data

Follow a strategic process to ensure data completeness and quality.

System

Ensure seamless compliance to the new accounting standards by selecting the right system.

Process

Identify, analyze and improve upon existing business processes within your organization.

Control

Assess current reporting and disclosure practices and establish new controls.

Sustain

Operationalize changes to ensure a permanent shift.

Strategy

FASB ASC 842 and IASB IFRS 16 represent a material change to the way you will account for real estate, equipment and embedded leases. But before diving in headfirst, you’ll need to develop a strategy regarding how to most efficiently and effectively approach this change across your organization. Decisions you make at the beginning of the process will have significant time, cost and risk implications throughout your road to lease accounting compliance.

Four Dimensions of Lease Accounting Compliance Strategy

The Road to FASB/IFRS Compliance

The FASB ASC 842 and IFRS 16 deadline is looming. It’s time to commence your road to lease accounting compliance.

Road to Compliance Podcast Series: Think Before You Act

The FASB ASC 842 and IFRS 16 deadline is looming. It’s time to commence your road to lease accounting compliance.
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  • Road to Compliance Podcast Series: Think Before You Act 00:00

Tango Leadership Series Recordings

Want to better understand the steps you need to take to prepare for the new lease accounting standards? Tune into some spirited panel discussions by industry experts.

Download videos recordings of Tango’s recent Leadership Series.

Panelists:

  • Jason Huggins, Director of Real Estate Administration, The Michaels Companies
  • Iyaye Amabeoku, Sr. Manager of Technical Accounting Consulting, RSM US LLP
  • Deborah Beams, Assistant Director of Accounting and Auditing, BKD CPAs & Advisors
  • Rick Zelinsky, VP of Product Strategy, Tango

Panelists:

  • Emily Watkins, Senior Vice President, Real Estate & Construction, Charlotte Russe
  • Vid Kumar, Senior Manager of Accounting, PetSmart
  • Kevin Seckel, Director, PwC Consulting
  • Kristin McLaughlin, Senior Director, Technical Accounting Consulting, RSM US LLP
  • Rick Zelinsky, Vice President, Product Strategy, Tan

“Preparing for the new standards can be daunting. But organizations can mitigate the potential disruption by taking time now to assess their options, with a strong, cross-functional team of stakeholders across finance, real estate, operations and IT.”

Steve Miller, Managing Director and Global Lease Accounting Lead, JLL

Policy

Most accounting standards have an element of interpretation, and the new FASB ASC 842 and IASB IFRS 16 lease accounting standards are no exception. Understanding the implications and impact of the new regulations prior to embarking on the Road to Compliance is the only way to minimize costly mistakes and timeline risks. These are massive changes, make sure take them on with eyes wide open.

Data Challenges: FASB/IFRS Lease Compliance

FASB Accounting Standard Update - Leases: Putting Leases On the Balance Sheet

“Putting Leases On the Balance Sheet”, a video by FASB, looks at how organizations that lease assets can apply the new leases guidance and features discussion with FASB Member Daryl Buck and FASB Senior Project Manager Danielle Zeyher.

Inventory

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.

The Average Time Required to Review Typical Lease Contracts

What’s a Lease Under FASB-IFRS?

Inventorying your entire lease portfolio is potentially more challenging than you might suspect. Leverage this decision tree to help you determine what qualifies as a lease under the new standard.

“On the challenge side, companies need to move posthaste toward compiling a complete inventory of their lease contracts. Sometimes companies start in on a lease and they kind of forget about it until the lease ends. They might not even know where the lease agreement is. It’s a big step just to gather all the lease information.”

Rich Stuart, Partner, RSM US LLP

Data

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.

Data Challenges: FASB/IFRS Lease Compliance

Road to Compliance Podcast Series: Common Data Traps and Effective Data Management

Bart Waldeck and Aman Gill from Tango discuss traps to avoid and best practices to consider.
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  • Road to Compliance Podcast Series: Think Before You Act 00:00

FASB-IFRS Data Traps

Have the right data is essential to FASB/IFRS compliance. Make sure you understand these 10 data traps.

“We’ve learned that for the more complicated lease contracts, you can need to up 75 different data points just to determine how to account for your lease. Multiply that be 1,000 or 2,000 leases, and that amount of data is not going to work on spreadsheets anymore.”

Derek Bradfield, Partner, Deloitte

System

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.

Four Dimensions of Lease Accounting CoWhat Companies are Planning Regarding their Lease Administration Systemmpliance Strategy

Do You Have the Right System Partner?

Picking the right system to ensure compliance and meet all your current and future lease accounting requirements is critical. Learn about the 10 telltale signs that will ensure you avoid the wrong partner.

Lease Administration: The Time for Change is Now

Lease information is incredibly valuable and can be considered a powerful strategic asset. However, over the last 15 years there have been few advancements in the capabilities offered in lease administration software providers. In the light of the new regulatory requirements, the time for change is now.

Some key considerations for selecting a system include ensuring the system: supports dual reporting for US GAAP and IFRS, supports foreign currency needs, captures items required to support new disclosure requirements supports tracking and recording of the impairment of the ROU Asset...

Marybeth Shamrock, Advisory Lead for Leasing, KPMG

Process

The majority of your lease processes will have to change with the new regulations. Identify, analyze and improve upon existing business processes within your organization, across all departments – accounting, legal, financial reporting, treasury, IT, etc. – to ensure you not only meet the new requirements by the deadline, but institutionalize this change for the future.

Compliance Matrix: Lease Touchpoints/Illustrative

FASB-IFRS Process Impacts

Leases have a path, or web of processes, that you follow today to administer and account for leases. Find out how the new regulations impact those process and what you can do to chart the path ahead.

Changes to the lease accounting standard have a far-reaching impact on lessees’ business processes, systems and controls.

Alok Jain, Partner and Tricia-Ann Smith DaSilva, Senior Manager, PwC

Control

With new policies come changes to internal controls. Start by reviewing your existing control structure related to leases and assess whether your current reporting and disclosure practices require adjustments. New internal controls must be designed, established and documented for audit purposes to comply to the new FASB and IASB standards, as well as to ensure ongoing SOX compliance.

Committee of Sponsoring Organizations of the Treadway Commission (COSO)

Getting Control

Getting Control: How to Ready Your Internal Controls in Support of the New Lease Accounting Standards Enhance your scrutiny in the design and effectiveness of internal controls is required to mitigate the increased risk presented by the new lease standards.

Financial Executives International: Developing adequate SOX §404 controls for leased asset accounting requires identifying control points are very new and different.

Sustain

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.

Benefits of Sustained Lease Accounting Compliance

Sustaining Compliance

The value in ensuring ongoing compliance to the new lease accounting standards is obvious. What is less so, and yet potentially more valuable, are the opportunities to improve strategic decision-making over the long haul.
Tango does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any lease compliance related activities.

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