• Is Excel good for lease accounting?
• 1. Lease terms constantly change, and it’s hard to keep up
• 2. Lease accounting calculations are complex and time consuming
• 3. Excel spreadsheets are prone to human error
• 4. Excel lacks historical data required for audits
• Benefits of lease accounting software
• Ensuring ASC 842 compliance
• Get Started!

Your business already uses Excel for many accounting calculations, including for ASC 840 lease accounting, so it’s understandable that you may want to consider continuing to use it as an option for lease accounting under ASC 842. And although it’s inexpensive to use and there’s comfort in using it, it may only get you so far in ensuring accurate lease accounting reports and calculations.

Is Excel good for lease accounting?

The reality is Excel will create challenges supporting large lease portfolios and the complex calculations that are required to comply with the new lease accounting standards. Ideally, the lease accounting solution you select should make it easy to view every lease – and address any changes made during the lease term, something that will be more difficult using Excel. Improperly tracking your leases and performing manual calculations using Excel puts you at risk of inaccurate data and reports.

In this blog, we will discuss why Excel is not a sustainable choice to accomplish lease accounting compliance, and why lease accounting software is critical to ensure accurate, confident compliance.

1. Lease terms constantly change, and it’s hard to keep up

As leases change (expire, terminate, etc.), it’s virtually impossible to keep track of each change using Excel. One of the main reasons this is so difficult to do manually is due to the large volume of leases held by organizations. Businesses often have hundreds, even thousands of leases, each with their own unique terms that regularly need to be tracked to ensure accurate lease accounting reports.

Unlike Excel, a fully integrated lease management and accounting technology solution is designed to centralize lease data in one location and, therefore, support ongoing lease maintenance. This enables you to view and maintain lease clauses and options under one single source of truth – without having to manually sift through data. Lease management software simplifies and streamlines the process of updating lease data, which ensures always accurate, reliable lease financials required for compliance.

For example, technology like Visual Lease provides automated critical date alerts so you can always know when leases require action. Excel lacks these built-in tools, which therefore puts you at risk of missing important options within your leases.

2. Lease accounting calculations are complex and time consuming

The calculations required to generate journal entries and disclosure reports for ASC 842 must be accurate to achieve and sustain compliance. Automated lease accounting technology is the only way to confidently create reliable, accurate reports.

Excel doesn’t have the capability to support the unique nuances required for lease accounting calculations. Utilizing Excel for lease accounting will likely take a lot of time and resources to produce calculations, and you may not be able to rely on those calculations, as there isn’t an efficient, sustainable way to validate accuracy. Even if only one element of your Excel formula is off base, it can negatively impact your calculated numbers – and you may not even realize the error before it’s too late. Additionally, Excel has a limit on the number of transactions that can be tracked and reported.

Lease accounting technology automates these otherwise complex reports and calculations, which saves you significant time that would be spent manually producing them in Excel, and also ensures the calculations are trustworthy. In fact, lease accounting software like Visual Lease provides proven calculations that are backed by a SOC I Type II audit.

3. Excel spreadsheets are prone to human error

Lease accounting is too important to risk manual errors. Just one mistake could lead to a failed audit, which is why lease accounting automation is so critical.

Using Excel to produce disclosure reports will typically raise red flags during your audit. Your lease data is already subject to a much higher degree of scrutiny by your auditors due to the new lease accounting standards, especially for initial adoption, so when it’s time for your audit, auditors appreciate a defined, reliable process that eliminates the room for human error within calculations.

An auditor knows if you utilize a lease accounting solution that is backed by a SOC I Type II report, your financial reporting and calculations should be reliable, and they won’t need to spend as much time testing the detailed transactions as they would with manual spreadsheets.

If you use Excel, auditors will most likely need to take a different approach to their auditing process, which can be time-consuming and costly. For instance, they may need to select a larger sample size of transactions to reliably test the details of your Excel calculations.

It begs the question, are you really saving money (and time) by using Excel instead of proven lease accounting technology? A failed audit can lead to increased fees and fines, along with damage to your business’ reputation. Why put yourself in a position where this can easily happen with Excel when you don’t have to?

4. Excel lacks historical data required for audits

Imagine inputting lease data into an Excel spreadsheet and the next day there are numerous changes to the data – you don’t know who made the changes and when. As leases change throughout the year, there needs to be an effective, reliable way for departments to capture any lease modifications to their portfolio, so that their lease data stays up to date. Doing this in Excel requires constant manual intervention and upkeep and can lead to a lot of questions raised by auditors and other stakeholders across your organization.

Providing transparent updates – with a complete audit trail of which update was made and when – will be incredibly important at the time of your financial audit. In Excel, there isn’t a reliable way to track who’s making changes and when the edits take place. This puts your business at risk of producing inaccurate, outdated information.

Lease accounting software provides full audit trail functionality that enables you and your auditors to see who, what, where and when every change to your lease data has been made. Having the history of every change to your leases is necessary to create a reliable lease accounting process.

Benefits of lease accounting software

Excel is one of the most accessible tools in an accountant’s arsenal. However, it wasn’t built to handle the thoroughness and accuracy required for lease accounting. To achieve and maintain lease accounting compliance, you’ll need to invest in a solution that was designed to set your business up for success.
Lease accounting isn’t just a one-and-done disclosure, it demands consistent upkeep of your entire lease portfolio. Lease accounting software is an integral part of conducting complex calculations with confidence, ensuring all your leases are up-to-date and achieving (and maintaining) lease accounting compliance.

Ensuring ASC 842 compliance

Lease accounting standards and constantly changing. This means spreadsheets need to be constantly reformatted to ensure you are remaining compliant with the latest regulation changes, requiring a robust software solution.

When it comes to ensuring your leases are compliant, don’t default to a spreadsheet. Make the move to a third-party verified, built-for-compliance lease accounting software solution.

Get Started!

Want to ditch the spreadsheets and learn how Visual Lease’s lease accounting software can help you sustain compliance? Click here to see our solution in action.

Written by: Robert Michlewicz, President at Visual Lease

I was drawn to Visual Lease for several reasons, one of the biggest is how the company is leading the market in addressing big areas of exposure and risk for public, private companies and government entities.

What exactly do I mean by that?

I’m proud to say that in June, Visual Lease was the only software provider named a Leader in both Lease Accounting and Lease Administration categories by G2.

Keeping in mind that this recognition is solely based on customer feedback, it is a direct reflection of the decades of work and expertise behind our software and services.

Visual Lease has been around for 25+ years, and was first developed as a world-class lease management solution, serving the real estate departments of some of the largest U.S. corporations. Anticipating the introduction of the new lease accounting standards, the company expanded the platform in 2018 to include robust lease accounting capabilities. Today, we help 1,000+ organizations get compliant, stay audit-ready all year long, take advantage of cost-savings opportunities and make better-informed operational decisions.

A reason I was drawn to Visual Lease is the same reason it’s been recognized by G2 (and a few others like Capterra, Deloitte, Inc.). As a business, we know the risks associated with complying with the new lease accounting standards without first implementing a proper lease management strategy. Further, we’ve seen time and time again just how valuable it can be for an organization to have accurate and complete lease data. We’ve built our platform on these insights, and our efforts are backed by some of the most experienced and well-informed experts in the industry.

But please, don’t take my word for it…. check out what our customers had to say when asked what they like best about Visual Lease:

• “Visual Lease streamlines our accounting for leases and completely replaces our existing Excel solution (for both GAAP and IFRS).” – Adam B.
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• “I like being able to view the details for all of our various leases in one place. It’s nice to have a one-stop shop that everyone (who needs the details) can access.” – User in Consumer Goods
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• “The simplicity of asset management is the best part of VL. It is very scalable lease accounting and management software. You can solve major lease accounting challenges with automated calculations and full integrations.” – Internal Consultant in Information Technology & Services
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• “Visual Lease gets the job done. The thing I like the most is that it does what we need it to do. It meets all of our needs from ASC 842 implementations, to rent payments, to tracking renewals, it does it all. Multiple departments use Visual Lease, and it does a good job at meeting our collective needs.” – Administrator in Healthcare
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• “I have used Visual Lease with two different companies now, and both times they have been positive experiences. I have managed a smaller lease portfolio of 30-50 leases. While I don’t utilize all of the tools that are available within Visual Lease, the tools themselves are well thought out. I recently completed our first year-end audit after implementing the ASC 842 lease standard, and the Standard Lease Reports were simple to pull and provide to our audit team. Visual Lease is well aware that there is a learning curve with using their software, so they have a comprehensive training website called ‘VL University’ that has on-demand training videos that will walk you through the features of the website. There is also a User Guide that I can review to learn how every feature works within the website. I have also had my service tickets replied to within 24 hours of submitting them. I think Visual Lease cares about its customers and is an excellent partner for managing leases.” – Assistant Controller in Manufacturing
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• “I like the alerts that help you know in advance when the lease terms are slated to change. Also, it is easy to add people to a distro list for alerts.” – User in Retail‌

This recognition is exciting, and a testament to not only where we’ve been, but also, where we’re headed. After just one month of working with our amazing team and customers, I am even more encouraged, energized and inspired to be a part of Visual Lease.

I’ll leave with two parting thoughts:

1. First and foremost, thank you and congratulations to the entire team at VL for your relentless commitment to our customers.
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2. And to my network, if you’re interested in learning more about why lease management is so critical to your business, visit this page.

Have you ever wondered how the public can participate in the development of accounting standards? Do you have opinions you would like to share? Many accounting standards governing bodies, such as the Federal Accounting Standards Advisory Board (FASAB or the “Board”), provide some opportunities to do just that.

Why Exposure Drafts? 

Whenever an accounting governing body considers new standards, or changes to existing standards, they release exposure drafts for public comment. The FASAB’s exposure drafts, which affect hundreds of federal agencies and the associated public, are posted publicly for commentary. You can find these exposure drafts and the template to submit comments on their website. The FASAB usually offers between 45 and 90 days to submit comments. Visual Lease contributes opinions to many standards, including these recently proposed changes. 

The Board considers these comments when deciding whether to move forward with the proposed changes. If interested, you can access the FASAB’s list of active projects and drill into any associated drafts on the FASAB website.

Anyone can submit comments, and the FASAB appreciates all views but particularly looks for comments that include the reasoning behind an opinion (pdf). The Board also appreciates it when the reasoning/concerns include the expected benefits and/or perceived costs of implementing a proposal.

2022 FASAB proposed lease disclosure and reporting changes

As a lease administration and accounting platform, Visual Lease proactively tracks FASAB projects that impact lease reporting and meeting the standards. An exposure draft to provide clarification and amend SSFAS 54, Leases and SSFAS 60 Omnibus Amendments 2021, was published May 9, 2022 with a comment period that ends Jul 8, 2022. The background includes:

• In November 2021, SFFAS 60 was published
• SFFAS 60 did not address all concerns related to leases and the implementation of the SFFAS 54 and other standards
• Clarification was needed relating to the discount rate for lease liabilities and receivables
• Clarification was needed to add intragovernmental sale-leasebacks and disclosure requirements in specific paragraphs and footnotes
• This proposal would amend SFFAS 54 paragraphs 42, 47, 48 and 59, and add new paragraphs 42 A-C and 59 A-C
• The effective date for the proposed changes is for reporting periods beginning after September 30, 2023

Below is a summary of Visual Lease’s response to this FASAB exposure draft: 

Discounting lease liabilities and receivables 

For leases without a stated interest rate, originally paragraph 42 of SFFAS 54 and the issued amendment in SFFAS 60, par. 19, required lessees to use the discounted rate from the “lessee’s estimated incremental borrowing rate.” This proposal would require the lessee to use an interest rate “based on marketable Treasury securities with similar maturity to the end of the lease term.”

The added paragraphs 42B and 59B allow for rounding up or down when selecting a marketable Treasury rate term as follows:

“[…] round down to the nearest maturity term with a published rate, interpolate the rate for the period between two published rates, or round up to the nearest maturity term with a published rate. The methodology for selecting marketable Treasury rate terms and related rates, interpolating, and/or rounding up or down should be consistent from period to period.”

The added paragraphs 42C and 59C clarify what to do if the lease goes beyond the longest-published Treasury security term. In this case, the entity should select the longest-published Treasury security term rate.

Using rates based on marketable Treasury securities would help reduce complexity and inconsistencies versus using the estimated incremental borrowing rate. It may also reduce the cost of determining the incremental borrowing rate, which can be costly to ascertain per our experience with private clients adopting the ASC 842 standard. Although we believe using rates based on marketable Treasury securities would make it easier to meet compliance requirements, we also recognize that it may, in certain circumstances, overstate or understate asset values.

We also believe paragraphs 42A (lessee) and 59A (lessor) may need clarification. Under the proposed amendments, the reporting agency has two options to determine its rate. The rate can be either based on a recent Treasury rate or historical average rate if the Treasury security has a similar maturity as the lease term “on the date of initial liability recognition (or the date the liability is updated).” If it is meant that to approximate a rate if a date-specific rate is not available, we believe that in today’s internet environment, detailed historical information is easily available so there likely would not be a need for this.

Intragovernmental sale-leasebacks disclosure requirements

This proposal also amends SFFAS 54 footnote 11 to paragraph 89 and paragraph 92. The purpose of the amendment clarifies that intragovernmental sale leasebacks are included and must follow the lessee and lessor requirements. Added are references to SFFAS 7 paragraphs 314-315 (intragovernmental) in footnote 11 and the reference to SFFAS 54 paragraphs 37-38 to paragraph 92.

What are your thoughts on these changes?  

Although we think these suggested changes should add consistency and reduce the complexity of meeting compliance, while avoiding costly estimations of the incremental borrowing rate, we also believe it may overstate or understate the value of some assets. What is your opinion?

FASAB’s Questions & Visual Lease’s Responses

QFR* 1 

Do you agree or disagree with the proposed amendments to address discounting lease liabilities and receivables, as reflected in paragraphs 3-7 (amending par. 42, 47-48, and 59 of SFFAS 54), and the Board’s basis for such proposals? Please provide the rationale for your answer.

AFR* 1

Visual Lease, LLC supports the proposed amendments to address discounting lease liabilities and receivables. SFFAS 54’s requirement to use an explicit rate is unchanged; if no explicit rate is stated, an equivalent risk-free rate is expected to be utilized.  The terminology provided in the proposed amendments is “based on marketable Treasury securities with similar maturity to the end of the lease term,” in essence the definition of a risk-free rate.

Visual Lease, LLC has observed that in the current private sector implementation of ASC 842, Leases, the new lease accounting standard issued by the Financial Accounting Standards Board (FASB), the use of a risk-free rate rather than a higher incremental borrowing rate (IBR) may have resulted in higher liability values (and therefore asset values) on organizations’ financial position. Additionally, Visual Lease, LLC has observed that this effect could trigger debt service covenants and otherwise cause inconsistency in analytical comparability. However, Visual Lease, LLC believes that, while organizations may have to caveat their financing reporting requirements to lenders to highlight these factors in that QFR 1 may result in less accurate and consistent valuation of liabilities, the suggested methodology does reduce complexity and provides user prescriptiveness in ease of use and availability of input data, thereby facilitating compliance.

Additionally, Visual Lease, LLC observes two impacts regarding the valuation of the lease liabilities and assets in practice: the applicability and accuracy of a specific rate to the entity in question, and the timeliness of the application of that rate. Namely:

• The discount rate applied could result in less accurate valuations if the entity has a higher cost of borrowing than the federal government rate.
• Private-sector administration of ASC 842, Leases, has shown that reassessments of incremental borrowing costs can be costly to ascertain and therefore are not necessarily “kept current”.  In a stable interest rate environment that is not a significant matter, but in an evolving rate environment (such as 2022 is turning out to be), lack of updates can result in more frequent and severe errors that may not consider or sufficiently identify entity-specific risk.

Visual Lease, LLC notes that the original wording in SFFAS 54 authorizing entities to use rates based on their own borrowing authority is expressly deleted in this exposure draft, removing calculations from actual costs, and resulting in less accurate valuations. Given the transparency of the Treasury Securities market and rate, and its availability to those entities subject to the FASAB (Federal Accounting Standards Advisory Board) standards, Visual Lease, LLC believes that the suggested changes enhance the process of calculation and result in an” always having up to date information available” situation when creating new or remeasurement calculations for lease accounting.  Therefore, Visual Lease, LLC supports the use of risk-free rates.

Additionally, and as a practical matter regarding application of the risk-free rate, the revised guidance allows rounding up or rounding down to the nearest maturity date, or to interpolate between two dates.  Extrapolating from the longest term (30 years) would not be permitted.  Paragraph 42A references “historical average rates” and appears broad in context and may require further clarification.  If it is meant that to approximate a rate if a date-specific rate is not available, we believe that in today’s internet environment, detailed historical information is easily available so there likely would not be need for this.

QFR 2

Do you agree or disagree with the proposed amendments to clarify the applicability of paragraphs 89-92 of SFFAS 54 to intragovernmental sale-leasebacks and the disclosure requirements applicable to them, as reflected in paragraphs 8-9, and the Board’s basis for such proposals? Please provide the rationale for your answer.

AFR 2

Initially, SFFAS 54 was silent regarding sale-leaseback transactions intragovernmental in nature.   Visual Lease, LLC agrees with the proposed amendments to clarify the applicability of paragraphs 89-92 of SFFAS 54 to intragovernmental sale-leasebacks and the disclosure requirements applicable to them, as reflected in paragraphs 8-9, and the Board’s basis for such proposals as it clarifies the requirements apply both to public sale-leasebacks and intragovernmental sale-leasebacks for disclosure purpose.  Visual Lease, LLC supports this provision because, while not prescribing accounting treatment, it does add clarity and transparency to the amount of intragovernmental sale-leaseback for each reporting entity through disclosure.

As a result of our analysis, Visual Lease, LLC is supportive of both clarifications provided in this exposure draft.

* QFR = Questions for Respondents

*AFR = Answer from Respondents

Do you know where all your leases are? If you don’t, chances are you haven’t conducted a lease inventory for your business. Conducting a lease inventory is a standard practice in lease accounting and a very important step in achieving ASC 842 compliance. This process involves finding all your lease data from various departments, which is often a time-consuming cross-functional effort.  

What is considered a lease under ASC 842? FASB defines a lease as “a contract or an element of a contract that conveys the right-of-use (ROU) of a physically distinct identified asset for a specified period of time in exchange for payment.” This includes embedded leases which are typically leases that are part of larger contracts. These contracts need to be identified and accounted for on the balance sheet in order to achieve compliance.  

However, there is an exemption for short-term leases. These contracts have a lease term of 12 months or less and will not appear on the balance sheet. Additionally, they do not include options to purchase the asset from the lessor.  

When it comes time for your audit, auditors want thorough, reliable and accurate data to examine. Completeness is key here, meaning that you’ve properly captured and identified all lease arrangements to be included in your calculations (including embedded leases). This will always be one of the items auditors test, which is why it’s important to conduct a thorough lease inventory.  

In this blog, we will share three essential tips to ensure you conduct a thorough lease inventory to support accurate lease accounting. By taking these steps, you will set your business up for lease accounting success and feel confident that you have every lease represented in your lease portfolio.  

1. Engage stakeholders from cross-functional departments 

To begin the process of conducting a lease inventory, you’ll need to identify what departments have lease contracts. Under ASC 842, leases can range anywhere from property, plant, equipment and even IT assets. Typically, we’ll see Real Estate and Legal departments heavily involved in leases, but there are also departments like IT that have unique lease contracts.  

Below are 5 recommended departments you should engage with and the types of leases they most likely handle.    

• Accounting/Finance
  • This department is a great starting point for conducting a lease inventory as they are the gatekeepers of the prior year’s lease information.
• Real Estate
  • The real estate department naturally handles all real estate and property leases, which may include things like office buildings and commercial real estate.
• Procurement
  • The procurement department handles all non-real estate leases which can range from vehicles, equipment, furniture and even fixtures.
• Legal
  • The legal department reviews all lease arrangements and is a great source of detailed information for embedded leases.
• IT
  • This department handles all IT procurement and procures IT assets. This can range anywhere from computers, networks and servers.

2. Organize your leases in one location 

Once you’ve gathered all your leases, it’s important to centralize them in one location. The most effective way to do this is by utilizing lease accounting technology. This will allow your cross-functional team to work under the same system and have a comprehensive audit trail for all lease changes. It will also help your team analyze lease data more thoroughly – which can help reduce the risk of overpaying for leases and ultimately help your business save money.  

3. Thoroughly check for accuracy and completeness 

As your business prepares for ASC 842 compliance, it’s important to examine (and re-examine) your lease contracts thoroughly for accuracy and completeness. Auditors will want to make sure that all transactions have been recorded properly on the balance sheet. It never hurts to double and triple check your work.  

In fact, make sure you’ve also cross-referenced all lease contracts with the Accounts Payable department. You could be paying bills for other leases from other departments, which can lead to misreporting.  

The outlined steps above should help your business create a smooth process in conducting a lease inventory. Remember, the more accurate your lease portfolio is, the better chance you’ll have in successfully achieving ASC 842 compliance. It will also help significantly decrease the risks of misreporting lease data, which can result in fines, increased audit fees and potential legal action. That’s why conducting a thorough lease inventory is not only important but can also be highly beneficial for your business. Successful lease accounting isn’t just compliance, it’s saving money and creating opportunities to improve business operations, and that all begins with your lease inventory.   

Marc Betesh is the founder and CEO of Visual Lease, the #1 lease optimization software provider, and KBA Lease Services, the nation’s leading lease audit firm. Betesh helped shape the current lease accounting standards in the industry and is a thought leader on ASC 842, GASB 87, and IFRS 16. Betesh is regarded as “top-rated faculty” at CoreNet Global Learning and has lectured on lease topics at New York University’s Real Estate Institute, American Bar Association, Association of the Bar of the City of New York, Practicing Law Institute, ICSC, Lorman Education Services and the Institute of Internal Auditors. He is also an active member of the New York and New Jersey Bars.

Carrie Summerlin Named FICPA’s New Chief Growth & Innovation Officer

The Florida Institute of Certified Public Accountants (FICPA) recently announced that Carrie Summerlin has been named the Institute’s new Chief Growth and Innovation Officer. She will officially join the FICPA on Monday, May 16.

Company achieves double-digit YoY annual recurring revenue, customer and employee growth

Woodbridge, NJ – April 18, 2022 — Visual Lease, the #1 lease optimization software provider, today announced results from Q1 2022, reporting an increase of nearly 40% in both customer and employee count, year-over-year. The company also announced an increase of nearly 30% in annual recurring revenue year-over-year, continuing its path of sustained double-digit growth. Today, Visual Lease helps more than 1,000 public and private companies, as well as government entities, with lease accounting compliance and the financial, legal and operational performance of their leased assets.

“With the introduction of the new lease accounting standards – IFRS 16, ASC 842 and GASB 87 – the stakes are much higher for organizations that do not have a sustainable way to effectively manage and track their leases,” said founder and CEO, Marc Betesh. “Because we’ve spent more than three decades helping companies manage their lease portfolios, we know exactly what is required to avoid the consequences of misrepresenting lease data during an audit. We provide the software, services and subject matter expertise that make achieving and maintaining lease accounting compliance one less thing that accountants and financial managers have to worry about. With Visual Lease, organizations will also benefit from a friction-free annual audit, in addition to greater visibility across their portfolios as their leases continue to evolve.”

Here are a few of the milestones Visual Lease achieved in Q1 2022:

• Expanded its Alliance Partner network across premium accounting firms and services companies, including F.H. Black & Company and Withum, to offer mutual clients best-in-class software and services.

• Hired across all departments and expanded its commitment to ongoing innovation by scaling the Product & Engineering teams by 35% year-over-year.

• Was named a Momentum Leader and a High Performer in the Lease Administration category in the G2 Spring Grid Report.
• Continued investments to further enhance the Visual Lease user interface (UI), building on its reputation of having an intuitive and easy-to-use platform.
• Held its Q1 Customer Advisory Board (CAB) meeting, gathering select financial management and real estate executives from its network of customers spanning the retail, hospitality, telecommunications, construction, financial services and manufacturing industries, to share insights and solicit input into the company’s solutions, services and strategic investments.
• Established an AWS data center in Frankfurt, Germany, enabling EU-based clients to benefit from stronger performance, newer services and features, as well as automatic compliance with residency and regulatory laws regarding their data.

To keep up with announcements from Visual Lease, visit the Visual Lease Newsroom.

About Visual Lease

Visual Lease is the #1 lease optimization software provider. We help organizations become compliant with FASB, IFRS and GASB lease accounting standards, while simultaneously improving the financial, legal and operational performance of their leases. Our easy-to-use SaaS platform is embedded with more than three decades of best practices from major corporations and leading industry professionals. Our award-winning solutions are used by 1,000+ organizations to manage 500,000+ real estate, equipment and other leased assets. Committed to ongoing innovation and unparalleled customer service, Visual Lease helps organizations transform their lease compliance requirements into financial opportunities. For more information, visit visuallease.com.

Media Contacts
Erica Bonavitacola
Visual Lease
T+1 732 860 4838
ebonavitacola@visuallease.com

Now, all of these organizations must adhere to a much more robust and complex reporting process than they had been accustomed to under the prior lease accounting standards. Despite this change, many continue to underestimate just how challenging the lease accounting process truly is.

Majority of surveyed tenants plan to expand their commercial real estate footprint in the New Year  

Woodbridge, NJ (Nov. 9, 2021) Visual Lease, the #1 lease optimization software provider, today unveiled a survey of 400 senior accounting and finance professionals and commercial real estate executives, 200 of whom representing the perspective of tenants, and 200 of whom representing the perspective of landlords. The report entitled, “Commercial Real Estate in 2022: Outlook for an Industry in Recovery,” shares insights into how both sides are approaching leases in response to the ongoing effects of the COVID-19 pandemic.  

“The commercial real estate industry has dramatically changed over the past nineteen months,” said Marc Betesh, founder and CEO of Visual Lease. “Businesses have grappled with new restrictions, considerations and challenges, which have directly impacted their real estate needs. Both landlords and tenants are uncertain of what shifts and trends are here to stay, which has made planning ahead more difficult than ever before. We created this report to help both parties better understand the industry and ensure that they are maximizing the value of future leases, setting themselves up for success in 2022 and beyond.” 

Key 2022 trends and predictions from the report include:  

• Ready to Commit to Longer Terms – Sixty-five percent of surveyed tenants are considering their physical space needs more than one year prior to signing a new lease agreement. Fifty-eight percent of tenants are prioritizing leases of at least five years in length, with nearly 20% interested in 10 or more years of occupancy. While plans are being made, the future remains uncertain as 93% of tenants note that their 2022 real estate strategy is temporary and will likely be revised post-COVID.  

• Real Estate Footprints Poised to Expand – Sixty-five percent of landlords expect tenants will add space to their real estate portfolios in 2022. Similarly, 70% of tenants plan to expand their commercial real estate footprint in the year ahead.  

• Back to Work: Urban Revival – Seventy-eight percent of landlords predict that the greatest demand for leased properties in 2022 will appear in cities. Tier 1 cities like Los Angeles and New York are anticipated to draw the biggest crowd, signaling a revival for major metropolitan areas that were previously hard-hit during the onset of the pandemic.  

• Rents Bounce Back, But Not All Businesses Will – Seventy-five percent of landlords expect 2022 commercial rent prices to be about the same or higher than rent prices were prior to the pandemic, which is in line with what 61% of tenants expect, as well. A rent increase may create some challenges as 61% of tenants admit that their organization fell behind on rent during the pandemic, and 37% are still behind on rent.  

• Future-proofing Leases to Accommodate Changing Demand – All surveyed (100%) landlords had tenants request modifications to their leases mid-term in response to the impacts of COVID-19. As a result, 99% of landlords have revised their agreements to better accommodate existing and future tenants, including changes to building rules and regulations (57%), operating expenses (54%), indemnification and insurance (45%), as well as sublet/assignment rights, rent abatement and force majeure clauses. 

• Approaching New Terms With Caution – Based on what they learned from managing their businesses during COVID-19, tenants note that the following will be important considerations when negotiating future leases: flexible scaling plans for space (57%), flexible lease termination (49%), shorter lease duration (36%) and an ability to sublease (33%), among others.  

• Poor Lease Management Led to Costly Mistakes – Nearly 80% of tenants have experienced negative impacts due to inadequate lease controls, the most frequently reported being the inability to respond to changing circumstances due to the pandemic (34%), missing an option to extend a deadline (28%), miscalculating lease costs (28%) and forgetting to update unfavorable or unwanted lease terms (28%).  

For full study results, download Commercial Real Estate in 2022: Outlook for an Industry in Recovery. 

About The Visual Lease Data Institute 

The Visual Lease Data Institute is a collection of market-leading data, trends and insights on lease accounting, management and optimization created and curated by Visual Lease, provider of the #1 lease optimization software. The Institute was founded on 35 years’ experience managing lease data and financials and was created to arm organizations with the knowledge required to achieve and maintain lease accounting compliance and leverage their leases as strategic business assets. 

About Visual Lease 

Visual Lease is the #1 lease optimization software provider. We help organizations become compliant with FASB, IFRS and GASB lease accounting standards, while simultaneously improving the financial, legal and operational performance of their leases. Our easy-to-use SaaS platform is embedded with more than three decades of best practices from major corporations and leading industry professionals. Our award-winning solutions are used by 800+ organizations to manage 500,000+ real estate, equipment and other leased assets. Committed to ongoing innovation and unparalleled customer service, Visual Lease helps organizations transform their lease compliance requirements into financial opportunities. For more information, visit visuallease.com.  For more information, visit visuallease.com. 

Media Contacts 
Erica Bonavitacola 
Visual Lease 
T+1 732 860 4838 
ebonavitacola@visuallease.com 
 
Anna Patrick 
Gregory FCA 
T+1 212 398 9680 
apatrick@gregoryfca.com 

Lease accounting compliance is not just a one-and-done disclosure. It is a new approach to accounting that includes an ongoing, cross-departmental effort – and a much higher level of scrutiny.

Lease accounting is interdependent on lease administration. The lease accounting standards (ASC 842, IFRS 16, GASB 87) require collecting leases from across your organization and staying on top of them as they change throughout the year. It is a collaborative effort that requires dedicated people (often cross-departmentally in IT, procurement, legal, etc.) with strict attention to detail.

To do so effectively, you need to implement strong lease controls and reliable technology. And though the lease accounting market offers a wide selection of software solutions to streamline compliance efforts, most lack essential lease administration capabilities. Many of the products on the market fail to address the importance of long-term lease administration throughout the financial process.

It is not possible to maintain lease accounting compliance without accompanying technology that supports both lease accounting and lease administration. Here’s why.

Software that includes both lease administration and lease accounting functionality is important to:

#1 Ensure centralized lease data

Having both lease administration and accounting together in one robust solution provides reliable, consistent lease information to support continued compliance and confident financial reporting. This significantly reduces errors, increases efficiencies and helps establish cross-functional collaboration across your business.

Consider this: When you get a new lease, it must be reviewed and abstracted into a system. You’ll need to implement controls that track both the legal and financial elements of that lease, which can control start dates, options, dollar amounts, etc. A platform that has both lease accounting and lease administration ensures that, from day one, your lease information is reliable and up to date.

With lease administrators owning the role of maintaining a single source of truth, accountants can be confident that all data and calculations will be consistent and accurate. In addition, software that supports both functions boosts efficiency by cutting down on time-consuming, tedious tasks outside of the accounting scope, such as searching for pertinent documents, tracking monthly rent increases and handling lease amendments.

#2 Track lease changes throughout the year

Leases are dynamic – and maintaining lease accounting compliance is not a one-and-done disclosure. It is an entirely new approach to accounting and an ongoing process. This can be tricky because leases are complex legal documents that sometimes do not have a clear owner. There are leases (real estate, equipment, embedded leases in maintenance agreements, etc.) that are often handled by different departments within a business.

Lease terms change as your business takes on new spaces, scales back or renegotiates. Implementing lease controls within lease accounting and administration software is the only way to ensure reliable data, repeatable processes, trustworthy guardrails and ongoing monitoring throughout the lease lifecycle. While some organizations selected lease accounting solutions lack this capability, they will run into major issues sustaining compliance as their leases change.

#3 Maintain a comprehensive audit trail

It is important to remember that compliance is not just about meeting accounting standard requirements, but also implementing proper policies and procedures to reduce risk.

Using lease accounting and lease administration software that has comprehensive user rights, integrated approval workflows and audit trail capabilities provides additional peace of mind knowing that any changes – including ones made to critical dates, financial impacts of modifications and more – are fully auditable.

Leases are often managed and modified by a variety of entities both inside and outside an organization. Due to the number of people involved in altering important calculations, the accuracy of the lease data can be difficult to control and may be prone to error without a solution built to handle multiple users. Taking this precaution in the beginning of your compliance journey will save you a lot of time long-term.

Lease accounting and lease administration go hand-in-hand

Lease accounting solutions that do not integrate lease administration into the software are unreliable, incomplete and more complex. Having both within one location is essential to ensure a well-rounded compliance strategy that covers everything you need for complete and accurate data management.

 While 100% of surveyed companies agree on the business value of complying with the lease accounting standard, most are underconfident and unprepared for the looming deadline

Woodbridge, NJ (July 29, 2021) – Visual Lease, the #1 lease optimization software provider, today unveiled the results of an in-depth study of 500 senior finance and accounting professionals analyzing where companies are in their efforts toward achieving compliance with ASC 842. The report reveals that despite 100% of respondents acknowledging the many benefits that lease accounting can bring, 75% are not yet compliant. This report marks the first release under The Visual Lease Data Institute, a collection of market-leading data, trends and insights on lease accounting, management and optimization created and curated by Visual Lease.

The 2021 Lease Accounting Market Analysis: The Road to Readiness for ASC 842 explores the journey, opportunities and barriers that companies face in their efforts to comply with the new accounting standard published by the Financial Accounting Standards Board (FASB), which requires them to track and fully disclose all qualifying leased assets, including commercial real estate and equipment leases. The report was informed by a proprietary survey of 500 senior finance and accounting professionals at private organizations with more than 1,000 employees.  It excludes public sector organizations and governmental entities, which have to comply with a similar lease accounting standard.

Key highlights of the report include:

• Real Business Opportunity – All surveyed senior finance and accounting professionals recognize that complying with ASC 842 will offer their companies substantial benefits, including more transparent valuation of the organization (54%), cost savings (54%), easier preparation for audits (53%) and the ability to make strategic lease decisions (50%).
• Need for Urgent Action – Despite the significant business opportunity that comes with lease accounting compliance, of the 75% of surveyed companies who are not yet fully compliant, nearly half (46%) are less than halfway through or have not yet begun the process. Moreover, a shocking one in five respondents admit that achieving full compliance has been a low business priority.
• Pandemic Delays – Many private companies may now be playing catch-up from the impact of Covid-19, with more than two in five respondents (43%) noting that their organization’s process has been delayed due to the global pandemic.
• Race Against the Clock – With the December 2021 deadline for private companies less than five months away, two in five respondents (40%) are only somewhat, not very, or not at all confident about their organization being ready to reach full compliance with ASC 842. One reason why? More than two in five (42%) surveyed admit that the ASC 842 compliance process has taken more time than expected, which puts those who have not started the process at serious risk. This is particularly concerning considering the average anticipated staff hours to gather all the necessary lease information to fully adopt ASC 842 is 1,334 hours, equivalent to more than 33 weeks of full-time labor for a highly skilled worker.
• Companies Can’t Do It Alone – More than one in three (36%) of senior finance and accounting professionals surveyed note that they don’t have the right people, technology and tools in place. High among the things they consider to be essential in the process are implementing new (48%) or upgrading existing (51%) lease management and accounting software.
• Not a One-and-Done Disclosure – Reaching ASC 842 compliance in time for the standard’s effective date is only part of the battle. Ninety-nine percent of respondents expect to face ongoing challenges maintaining compliance after the 2021 deadline. Among the most anticipated challenges include accurately tracking and managing future modifications to leases, adopting new technologies to optimize the process and continuing to train and educate staff.

“We understand just how complex lease accounting is,” said Marc Betesh, founder and CEO of Visual Lease. “For 35 years, we’ve seen firsthand how tight lease portfolio management can amount to millions of dollars in savings and improve business performance. With the deadline for private companies to comply with ASC 842 rapidly approaching, we knew it was the right time to gather our insight, experience and expertise to provide you with the first report under The Visual Lease Data Institute. Our goal is simple – to arm you with the information you need to feel confident about your organization’s lease accounting compliance journey.”

For full study results and helpful guidance towards ASC 842 compliance, download The 2021 Lease Accounting Market Analysis: The Road to Readiness for ASC 842.

About Visual Lease

 Visual Lease is the #1 lease optimization software provider for managing, analyzing, streamlining and reporting on lease portfolios. Developed by industry-leading lease professionals and CPAs, it combines GAAP, IFRS and GASB-compliant lease accounting controls with easy, flexible and automated lease management processes. More than 700 of the world’s largest publicly traded, privately-owned and public sector organizations rely on Visual Lease to control their lease portfolios, integrate with their existing business systems and maintain regulatory compliance. Committed to ongoing innovation and unparalleled customer service, Visual Lease helps organizations transform their lease compliance requirements into financial opportunities. For more information, visit visuallease.com.

About The Visual Lease Data Institute

The Visual Lease Data Institute is a collection of market-leading data, trends and insights on lease accounting, management and optimization created and curated by Visual Lease, provider of the #1 lease optimization software. The Institute was founded on 35 years’ experience managing lease data and financials and was created to arm organizations with the knowledge required to achieve and maintain lease accounting compliance and leverage their leases as strategic business assets.

Media Contacts
Erica Bonavitacola
Visual Lease
T+1 732 860 4838
ebonavitacola@visuallease.com

Katie Vroom
Gregory FCA
T+1 212 398 9680
kvroom@gregoryfca.com

Company reports key strategic investments and double-digit annual recurring revenue growth year-over-year

Woodbridge, NJ – July 20, 2021 — Visual Lease, provider of the #1 lease optimization software, today announced results from the second quarter of 2021, including double-digit annual recurring revenue growth year-over-year, as well as industry recognition for its robust software capabilities and sustained high growth. The company also continued to make strategic investments across its product and service offerings to help organizations leverage their lease accounting process to unlock a range of business opportunities.

“We recognize that lease accounting compliance is a long game, and there’s a lot to lose and gain in this process if you’re not on top of the changing requirements,” said Marc Betesh, founder and CEO of Visual Lease. “We’re continuing to make investments in our product and team to not only streamline our customers’ lease accounting compliance, but also help them achieve efficiencies and hard-dollar savings that can have a real long-term impact on their businesses. In fact, we recently conducted a survey of 500 senior finance and accounting professionals, and 100% of them recognized these additional benefits stimulated by the adoption of the new lease accounting standard. We know and understand what those benefits are and show our customers how to achieve them.”

In Q2 2021, Visual Lease:

Product

• Enhanced its reporting performance, resulting in a doubling of the speed of generating disclosure, journal entry summaries and roll-forward reports.
• Further expanded its GASB support, launching technical accounting features to streamline the handling for lessor termination calculations, schedule modifications and reports.
• Launched short-term calculations, empowering users to easily create short-term calculations irrespective of the lease terms.
• Introduced its Customer Advisory Board, assembling a select group of senior financial management and real estate executives from across its base of valued customers to share insights and solicit feedback on Visual Lease’s solutions and services.

Talent

• Announced Guy Zerega as SVP of Sales, bringing in an experienced software sales leader to help the organization continue to grow and scale with the industry.
• Welcomed Pamela Cosmillo as Director of Human Resources, placing an increased emphasis on its people and position as a leading workplace.
• Grew its employee base by more than 35% year-over-year, hiring across a range of departments and levels within the organization.

 Industry Recognition

• Continued to expand its Alliance Partner network, solidifying its partnership with Jackson Cross Partners and Alvarez & Marsal to deliver increased value to shared customers navigating new lease accounting standards (ASC 842, IFRS 16 and GASB 87).
• Named a “High Performer” and “Momentum Leader” in the lease administration category by G2.
• Recognized as a Top Workplace in 2021 by NJ.com.
• Honored with a Bronze Stevie® Award in the Fastest Growing Company of the Year category in The 19th Annual American Business Awards®.

To keep up with announcements from Visual Lease, visit the Visual Lease Newsroom.

About Visual Lease

Visual Lease is the provider of the #1 lease optimization software for managing, analyzing, streamlining and reporting on lease portfolios. Developed by industry-leading lease professionals and CPAs, it combines GAAP, IFRS and GASB-compliant lease accounting controls with easy, flexible and automated lease management processes. More than 700 of the world’s largest publicly traded, privately-owned and public sector organizations rely on Visual Lease to control their lease portfolios, integrate with their existing business systems and maintain regulatory compliance. Committed to ongoing innovation and unparalleled customer service, Visual Lease helps organizations transform their lease compliance requirements into financial opportunities. For more information, visit visuallease.com.

Media Contacts

Erica Bonavitacola
Visual Lease
T+1 732 860 4838
ebonavitacola@visuallease.com

Geena Pickering
Gregory FCA
T+1 212 398 9680
gpickering@gregoryfca.com

Lease accounting is a massive, cross-functional effort. It involves various stakeholders and systems that impact (and are impacted by) leases. It is not just an accounting problem – and goes further beyond producing a disclosure report.

The dynamic nature of leases prompts constant adaptation, and organizations need an easy way to manage those changes. The bigger the portfolio, the more complicated it becomes, which is why it is important to determine how you will handle accurate lease information and financials.

There needs to be a reliable way to manage leases throughout the year, given lease changes can result in hundreds, potentially thousands of calculations and permutations. While the market offers a wide selection of solutions, not every tool is one-size fits all. Each lease accounting solution offers its own experience – from implementation to daily usage and beyond.

In this blog, we’ll break down the top differentiating areas and questions you should consider (beyond producing accurate calculations and reports) when evaluating lease accounting software.

Configurability vs. customization

Every business is unique with their own processes and leases that contain specific information. Your lease accounting solution should be flexible to match the way you run your business. Weighing the differences between a custom and configurable solution can save you significant time and money.

• Does the solution require customization for unique business requirements? If so, what are the costs and what is the maintenance associated with customization?
• Does the solution support configurable data fields, groupings and financial categories to match your industry and organization?
• Can the solution generate ad-hoc reports on the fly?

Customer experience

At the end of the day, your lease accounting solution relies on the people using it. Make sure you are properly set up and running with thorough, dedicated customer support from implementation and beyond.

• Does the vendor provide in-house, dedicated implementation support?
• Does the vendor offer ongoing customer support at no additional cost? What are their estimated response time SLAs?
• Does the vendor provide ongoing trainings and helpful tools dedicated to various users?
• Is the vendor committed to continuous product enhancements based on customer needs?

Integrations

Your lease accounting software should be able to handle even the most complex lease administration and accounting scenarios, including data imports and exports to various third-party solutions for a true return on investment.

• Does the software integrate with your existing technology infrastructure, such as your ERP and financial systems?
• Does the software offer flexible options to schedule, monitor, manage and automate data imports and exports between third-party applications?

Ease of use

Lease accounting is complex and requires constant adaptation from a variety of stakeholders. You need an easy way to view, track and manage all updates for full auditability.

• Is the user interface intuitive and easy to use?
• Does the solution support the ability to view changes made by various users?

Security

There is a lot of money – and risk – in most lease portfolios. Make sure you feel confident in your solution’s ability to keep your information safe and generate accurate calculations.

• Are there tools for administering individual and group users for system access, roles and permissions?
• Is the solution and calculations backed by a SOC I Type II audit?

Selecting the right lease accounting solution for your business is critical to your success. Evaluating various tools is a necessary part of the process to ensure you are equipped with what is needed to meet ASC 842, GASB 87 or IFRS 16 compliance.

If you’re in search of an all-encompassing lease accounting management software that ensures you’re achieving and maintaining compliance, Visual Lease is the solution you’ve been looking for. Schedule a demo with our team to see if we’re a match.

Hundreds of private organizations have begun their journey towards lease accounting compliance. Although, many of them underestimate the amount of effort involved with preparation. In particular, assembling a team of internal resources – and identifying their responsibilities – is one of the most important steps to a successful implementation.

In this blog, we explore 3 critical ways your lease accounting and management team can help you achieve success – and why you should get started now.

1) Lease inventory demands cross-departmental effort.

Identifying all leases held by an organization is a complex and time-consuming task that the accounting team cannot do alone.

To gather a full scope of all leases, accounting must engage with different areas of the business, including real estate and finance. You may also find it necessary to also include representatives from lease administration, C-level management, legal, procurement and IT.

Real estate or facilities teams are an efficient way to identify a company’s property leases. If a business has multiple locations, this may involve tracking down records from many different sites.

Additionally, departments such as procurement, IT and legal are essential to search through records for equipment leases and other contracts classified as leases under the new standards. For example, procurement might use a spreadsheet or other tool to track assets such as office machines, IT equipment or vehicle fleets.

By involving the necessary personnel early in the lease identification process, companies can feel confident that their lease inventory is thorough and accurate.

Learn more: How to Assemble Your Readiness Team

2) Lease information affects a variety of business decisions.

A company’s chosen lease accounting technology affects more than just the accounting team. Centralizing lease information into one system can transform efficiencies and financial savings beyond lease accounting compliance.

Therefore, when evaluating a lease accounting system, you will want to have a clear understanding of who will need to access lease information. The chosen solution should make it easy for them to make updates, run reports and export any data they may need. Thus, it may be necessary to include those representatives during the evaluation of the solution.

For instance, any employees responsible for ongoing tracking and management of leased assets — including making changes and adding any new leases — should be identified to verify the system is intuitive and easy to use, and therefore will help them keep lease data accurate and up to date.

You may want to also include various departments, including IT, to evaluate how lease technology can support your organization beyond just accounting compliance, including accounts payable, accounts receivable and other data-driven decisions. IT is integral to this process, to ensure the solution can properly meet your requirements for integration with various third-party systems.

Furthermore, involving executives, real estate/facilities staff, and others in the preparation process can make sure the chosen solution meets their needs beyond accounting and compliance requirements.

3) Teamwork is essential to lease accounting compliance.

It clearly takes more than the accounting team to transition to the new lease accounting standards and achieve compliance.

By identifying the roles and responsibilities of internal stakeholders early in the process, the compliance team can create a plan of action that ensures accountability throughout lease accounting implementation.

A team approach improves the efficiency, thoroughness and accuracy of data abstraction, which ultimately helps to ensure the company will meet compliance requirements on time and on budget.

Together, the transition team can make informed decisions that will make long-term impacts on the company’s lease investments.

Long-term benefits for lease accounting and for the business

Once a company successfully transitions to the new lease accounting standards, the identified team can continue to use lease technology to share information and make decisions that impact both financial reporting and business performance — empowering the company to both maintain ongoing compliance and maximize the return on leased asset investments.

To create a plan for assembling your stakeholder team and other steps of lease accounting  implementation and compliance, use the Lease Accounting Milestone Planner.

Lease Accounting Compliance: Lessons from Public Companies

Although private companies still have some time to adopt the new lease accounting standards, public companies have already had to meet their compliance deadlines. In doing so, these companies have learned valuable lessons that can be applied to:

• Private companies that are in the planning stages of lease accounting compliance
• Public companies that rushed to select a tool and now see they need a better, long-term solution for their lease accounting needs

What are some of the things that helped public companies be successful in implementing the new lease accounting standards? What areas could have been improved?

Below, we share some helpful advice based on the experience of public companies that have already adopted new lease accounting standards.

Challenges in Achieving Lease Accounting Compliance

What lease accounting capabilities do you need for long-term reporting and compliance?

Some public companies found out the hard way that the accounting solution they chose was missing key capabilities that they need to ensure accurate, ongoing lease financials. 

For example, while some companies used a lease calculator tool to meet their initial compliance needs, they now realize it will not help them maintain compliance and do their reporting for the long term. 

That’s because every time a lease changes (which is often), the pertinent information needs to be updated in the lease accounting system so that subsequent reporting will be accurate. However, a lease calculator simply does not provide the tools for updating and maintaining lease data.

Public companies that chose a software-based solution with the following capabilities are better positioned for long-term compliance and accuracy:

• A single source of truth for lease data
• Automated calculations and financial reporting, including disclosure reports
• Tools for backup and verification of calculations and lease data

What is the best way to manage a large and/or complex lease portfolio?

Any public company with multiple locations or a large lease portfolio — including equipment and real estate — quickly learned that manually searching for and reporting on those leases would be a time-consuming and inefficient process.

To save hundreds of hours in time finding and verifying lease information, select a solution that provides a central repository for recording and tracking lease data. Once your leases are entered in the system, you can easily generate the reports needed for compliance — plus use the solution for ongoing updates and to view lease details on demand.

Advice for Successful Lease Accounting Audits

How long does it take to implement lease accounting?

Time and again, public companies learned that lease accounting implementation is a complex and time-consuming project, with high stakes and stakeholders across the business. 

While a lease accounting software solution can be implemented in weeks, the work required before solution implementation can take many, many months. So, it is mission-critical to invest  time up front in both auditing your lease portfolio and evaluating the technology you will use for lease accounting.

For help in planning your lease accounting compliance project, use our Lease Accounting Milestone Planner. 

What are some best practices to satisfy auditors? 

Leases can change fast and it can be hard to stay on top of them. To provide auditors with accurate and thorough lease financials, it is recommended to have checks and balances in place. To do so, you can use a lease accounting system to provide a full audit trail of updates to your changing leases. This helps provide auditors with a clear and complete picture of your business’s finances.

Strategies for Maintaining Compliance

How do you maintain accurate lease financials beyond compliance?

Look at the new lease accounting requirements as an opportunity to get the best solution for the long term — one that will continue to meet your business needs and satisfy auditors year after year.

For example, a technology solution that provides both lease accounting and lease administration capabilities helps public companies:

• Achieve compliance and meet ongoing lease accounting requirements
• Ensure that lease data is always accurate and up to date
• Save time by making lease information searchable and available at a glance
• Control costs by staying on top of all payments and transactions
• Meet important dates for renewals, renegotiations and options

How can you account for a growing or changing lease portfolio?

With the time and cost required to implement lease accounting, it makes sense to choose a solution that does more than just help you achieve compliance. Successful public companies opted for technology that will scale to accommodate any changes that might occur in their lease portfolio and provide ongoing lease management capabilities.

A cloud-based software solution can not only automate and streamline lease accounting and reporting, but also provide tools for making changes to financials, adding documents and clauses, searching for lease clauses and editing existing leases.

The Simple But Important Lessons Learned

As the experience of public companies are shown, there are some fundamental lessons that can help you to achieve lease accounting success:

• Get started now — start planning for your lease inventory and your lease accounting technology ASAP
• Do your research — get input from across the business, and perhaps consult an accounting firm, to identify leases and reporting requirements
• Think ahead to your lease management needs beyond compliance — to get maximum ROI from your lease accounting technology
• Set yourself up for success — choose a comprehensive lease accounting and lease management technology solution, such as Visual Lease

Want to hear directly from a public company about their experience preparing for and managing ongoing lease accounting compliance? View our on-demand panel discussion.

Recently, we have talked a lot about ways that companies can understand their lease obligations and reduce costs  in light of COVID-19. What many businesses have discovered during this time is that a lack of insight into these responsibilities and costs has huge implications — not just for lease accounting, but also for day-to-day business decisions and ongoing cost management.

As companies look ahead to recovery from the economic impacts of COVID-19, it is more important than ever to have a technology solution in place to help avoid financial issues and better manage the obligations associated with leases.

That is where a robust lease administration solution can help businesses avoid risk and realize benefits beyond lease accounting in three crucial ways.

1. Gain Greater Visibility into Leases with Lease Administration Software

As many companies have recently learned, the ability to find leases and uncover the important details buried within them — including clauses, due dates, and options that have an effect on lease obligations and costs — can be a complex and time-consuming task. This is especially true for organizations with multiple locations and, potentially, hundreds of leases to manage.

A lease management solution such as Visual Lease, which combines lease administration and lease accounting capabilities, makes it easy to manage lease data and determine your rights and responsibilities. The software provides the ability to search for specific lease parameters and gather the information you need to:

• Track payments and analyze costs
• Identify overpayments or opportunities to cut costs
• Get a complete picture of leases as part of the company’s bigger financial picture
• Make informed business decisions related to lease obligations and overall costs

2. Keep Track of and Manage Changes Related to COVID-19

With the closures, disruptions, and cut-backs to businesses related to the COVID-19 pandemic, many companies are coping with another new challenge — the need to keep track of any changes made to their leases during this time, such as:

• Lease modifications
• Lease terminations
• Lease impairments
• Variable payments
• Operating expense pass-throughs

Finding every affected lease and manually updating each one is cumbersome and time-consuming. Plus, it opens your business up to the risk of manual errors.

Lease administration software makes it easy to change lease information when you need to — providing the tools to find the pertinent leases and quickly update them with changes to payments, terms, options, and other information you will need later for lease accounting.

3. Stay Current on All Leases with Lease Administration Tools

A lease administration system also helps you stay current on critical dates and upcoming events within your leases — including opportunities to make changes and save money.

Lease administration software provides tools for tracking changes, alerting you to important  dates and events, and keeping your critical lease data up to date at all times. For instance, you can have the solution automatically alert you to deadlines for exercising lease options.

Find More ROI in Your Leased Assets

A combination lease accounting–lease administration software solution not only helps you organize, track, and report on lease data in accordance with the latest lease accounting standards. It also provides ready access to accurate, up-to-date information that can help you get the most value from your leased assets.

So, while some lease accounting deadlines have been pushed back, it makes sense to implement and use a lease management solution now. It will empower you to not only handle lease issues related to COVID-19 lease, but also manage lease financials in a way that can help you maximize lease ROI, improve liquidity, and plan for the future

Ready to get started ASAP? Request a demo of Visual Lease today!

Across industries, sectors and organizations of different sizes, the COVID-19 outbreak has touched virtually every business in some way. Between stay-at-home orders, emergency closures, and supply chain disruptions, companies are coping with a lot of operational and financial challenges posed by the crisis. 

In the middle of all this uncertainty, the deadlines for compliance with the latest lease accounting standards have once again been extended. That means: 

• Private companies have an additional year to adopt new lease accounting standards in their financial statements. 
• Public not-for-profit companies that have not yet issued financial statements also get an extension. 
• Government entities that comply with GASB 87 postponed the effective date and subsequent reporting deadlines for 18 months.  

That’s good news for businesses that have yet to fully implement the new lease accounting standards or are still in the process of updating their accounting practices. But just because there has been a reprieve does not mean you should delay implementing a lease accounting software. Furthermore, implementing a tool to track your leases can be incredibly helpful.  

Stay Ahead of Compliance with Lease Accounting Software 

Like we’ve been saying, getting ready for compliance with the new lease accounting standards is a time-consuming and intensive process. That’s because the reliability of your financial reporting depends on doing a thorough lease inventory and accurately consolidating all your lease data. 

Our advice is to continue moving forward as quickly and efficiently as possible on these compliance efforts. That includes implementing lease accounting software to help you organize and report on your lease data in support of the new standards. 

Having access to accurate lease data is also crucial to business and accounting decisions related to the pandemic. 

That means lease accounting software will not only help you meet the compliance deadline down the road. It will also enable you to search for and manage critical lease information right now — and even find ways to save money in circumstances related to COVID-19. 

Leverage the System to Save Time and Money  

Now more than ever, companies need to understand their lease obligations and rights so they can manage costs and find areas where they might have some flexibility. (Read more in our blog COVID-19 and Lease Accounting: Understanding Your Lease Obligations and Costs.) 

A lease accounting and management solution such as Visual Lease can help your company save time and money by providing greater control over your leases. It provides the tools to search for and view important information needed to stay on top of your lease requirements in three crucial areas: 

Better Manage Your Financial Responsibilities 

Visual Lease tracks the relevant language of all your leases, to help you determine what rights and options you have regarding rent and other payments. For example: 

• What are your monthly payments obligations across all your leases? 
• Are you paying for assets that the business no longer uses or needs? 
• Do the leases include a grace period before any late fees apply? 
• Do any leases allow you to defer payment and if so, for how long? 

• Is the company overpaying for services that it is not receiving during a business closure? 

Having this and other lease information readily available can help you better manage costs and cash flow. It can also save valuable time when you are looking for lease clauses and other helpful information you need to effectively negotiate with landlords (or with tenants, if you are a landlord). 

Understand Your Legal Responsibilities 

Are there any lease clauses that protect your business from potential casualty, force majeure, or even bankruptcy? 

Without a lease accounting and management solution, you would have to look for that type of information by manually reviewing all of your leases. But with a solution such as Visual Lease, you can easily search for pertinent clauses to help determine what the business’s legal rights and responsibilities are. 

Keep Track of Lease Options and Notices 

You can also use Visual Lease to find options that will help you improve liquidity and reduce expenses during a business closure or slowdown. For example, you can search leases to find out what options you may have for downsizing or relocating a space — or for rent abatements or lease renewals, impairments, or terminations. 

You can even set up the lease management solution to automatically alert you to important events, such as: 

• Options that must be exercised by a certain date 
• Notifications that must be sent about upcoming lease options 

The alerts will continue to be important as companies reassess how they do business, the resources they need, and the options they will exercise moving forward in what may be a very different, post-COVID environment. 

Lease Accounting Software: Beyond Compliance 

How leases address defaults, terminations, options, rent abatements, and other issues can have a big impact on the decisions that a business must make, under all sorts of circumstances. 

Having lease accounting technology that puts these and other lease details at your fingertips will not only prepare you for lease accounting compliance — it will also empower the business to make more informed and timely decisions, both during the COVID-19 pandemic and in the days, weeks, and months to follow. 

In addition, lease accounting software provides the tools a business will need to calculate and report on lease modifications, deferrals, and other changes post-COVID. 

With all the business closures and cutbacks due to the COVID-19 pandemic, a lot of companies are worried about not only managing their lease expenses now, but also accounting for changes to payments and other lease obligations later. 

As the COVID-19 emergency continues, more companies are faced with making critical decisions on lease issues, which in turn have an impact on lease accounting.  

How will lease concessions and other changes that occur in the wake of the COVID-19 crisis affect your lease accounting? 

How to Handle Lease Changes Related to COVID-19 

While there are not any additional lease accounting processes or rules to learn for handling concessions due to circumstances surrounding COVID-19, you may elect the method of selecting practical expedients, instead of performing a lease–by–lease analysis of the legal language. This change currently applies to both FASB guidelines (whether 842 or 840) and IASB, but only for lessee schedules. Other lease accounting issues will continue to be guided by the specific terms of your lease contracts and your lease accounting standards (i.e. ASC 842, IFRS 16, GASB 87). 

While you should always consult with your accounting advisory partner regarding your specific situation, the following guidelines can help as you consider the different concessions that may apply to your lease accounting during and after COVID-19: 

• Rent Abatement  

The COVID-19 pandemic is causing companies to ask how to account for rent abatements. The FASB and IASB have provided the ability to elect to treat rent abatements as either existing lease obligations, or as negotiated amendments to the terms. However, there are limitations on this ability to choose. For example, modifications which materially increase the lessor’s rights or the lessee’s obligations must be treated as modifications.  

If a company elects to not take the expedient of not determining if the lessor is obligated to provide a rent concession, or if the lease is not eligible for such election, the treatment will be dictated by the terms of the lease: 

• If the landlord is obligated, the concession is considered a variable lease payment. No remeasurement is required, and the abatement will flow through to any disclosure reporting. 

• If the landlord is not obligated, the concession is considered a negotiated modification. A remeasurement should be run when the abatement term is agreed on and continue through the lease term. 

• In the event there is not an agreement to abate rent, this is considered a short payment. The payment is recorded in Visual Lease as if made, but as in the normal course of events, the cash transaction books to Accounts Payable. Therefore, while the Ending Liability is reduced on schedule, it is replaced by an Accounts Payable liability until the payment is made. 

COVID-19 presents such an unforeseen and disruptive impact upon operations, therefore, many companies are electing to keep related costs and abatements distinct from normal operating expenses. As a result, we suggest creating distinct financial categories in this situation. 

• Accounting for Changing Discount Rates 

Lower interest rates in response to COVID-19 may affect the Incremental Borrowing Rate (IBR) that lessees typically use as their “discount rate” for lease accounting. The IBR may also be affected if borrowing costs change — for example, because of a declining credit rating. 

A lower interest rate increases the calculated amount of a lessee’s right-of-use (ROU) assets and lease liabilities. This in turn affects balance sheets when lessees enter new leases, remeasure existing leases, or transition to new lease accounting guidance. 

• Partial Termination  

With more people working from home, some businesses may invoke a lease clause or negotiate a lease modification to reduce their square footage and the related costs.  

Referring to your lease accounting guidance can help you identify what options you may have for recording a partial termination or other modification that reduces the scope of a lease. For example, under ASC 842, you have the choice of reducing the ROU asset proportionate to either the reduction in the lease liability or the reduction in the leased space. 

• Impairment  

In an economic downturn, leased assets such as property, plants and equipment may be valued below their current balance. The result is the impairment of ROU assets, which may require a different amortization calculation for operating leases. 

From the lease holder’s/lessor’s point of view, some assets held for lease may be impaired if demand for those assets decreases or if rental rates drop significantly. 

For either party, a lease accounting software solution with automated impairment processing helps to simplify the complex process of recording these types of lease impairments. 

Handle It All with Good Communication, and Intuitive Software 

In any still-evolving situation like the COVID-19 pandemic, it is always a good idea to consult with your legal counsel and accounting advisory partner as needed to make sure you understand all your rights, obligations and expenses regarding your leases. 

Maintaining good communication among all parties in a lease is extremely important to help you from avoiding potential high-risk misunderstandings and mitigate conflict. For example, a landlord may misinterpret a tenant’s need to shutter the doors for the short term as abandonment. Or, a tenant could have difficulty getting a concession for unused office space if the business closure is not documented and the landlord is not notified according to the lease terms. 

Additionally, taking advantage of tracking your leases clauses and financials within a reliable lease accounting and administration software, such as Visual Lease, is incredibly helpful to save your organization significant time and money during and after COVID-19. For more information to see how Visual Lease can help your business evaluate your leases as it relates to COVID-19, visit here or reach out to us today to learn more about our COVID-19 lease impact service. 

Deciphering financial and contractual obligations of a lease can be a challenge. And that is especially true during an unprecedented event, such as the COVID-19 pandemic. All you really want to know is, what are you responsible for?

Below, we answer questions about some of the common lease provisions that may pertain to COVID-19 and how they could affect your lease obligations — and ultimately, your lease accounting.

Provisions That May Pertain to COVID-19 and Lease Accounting

Since every lease has different language, obligations and consequences, we always recommend talking to your legal counsel to get help interpreting lease provisions and determining if and how they pertain to your business.

Regardless, the common lease clauses below may include language that will have an impact on tenant/lessee or landlord/lessor responsibilities during unusual situations such as the COVID-19 crisis.

What is a Force Majeure provision?

Force Majeure is a clause excusing nonperformance by the landlord/lessor or tenant/lessee, with specific lease language that defines what events trigger an exclusion. This lease provision typically also defines whether or not specific types of performances are covered — for example, a landlord’s obligation to perform certain maintenance and repairs.

The lease language might provide different definitions of “Force Majeure” events, but they may include acts of God, terrorism, natural disaster, governmental action, riots, or more generally, events out of the party’s reasonable control. The more specific the language is, the less likely you can rely on the clause to postpone or cancel obligations under the lease.

What does Force Majeure excuse or not excuse?

The Force Majeure clause may excuse things such as a landlord’s requirement to make repairs or a tenant’s requirement to maintain janitorial services within the premises. Note that the payment of rent is often not excused.

What is an example of a Force Majeure clause under which rent payment is not excused under COVID-19? 

“This Lease and the obligation of Tenant to pay the due rent hereunder and perform all of the other covenants and agreements hereunder on the part of Tenant to be performed shall in no way be affected, impaired or excused because Landlord is unable to fulfill any of its obligations under this Lease . . . if Landlord is prevented or delayed from so doing by reason of strikes or labor troubles or by accident, or by any cause whatsoever beyond Landlord’s control, including, but not limited to, laws, governmental preemption in connection with a national emergency or by reason of any Requirements of any Governmental Authority.”

What is a casualty provision?

Most leases have a provision regarding what happens when the building, premises, or property is damaged by a casualty such as a fire, flood, hurricane, earthquake, and similar events.

What does a casualty provision mean in a pandemic like COVID-19?

Casualty provisions rarely cover government shutdowns or pandemics. Usually the only events covered are those that would physically damage or destroy a building or asset in some way.

What kind of obligations are included in leases regarding landlord vs. tenant responsibilities?

Generally, leases may include obligations such as maintenance and repairs, how common areas are handled, building hours, base-building cleaning, and extra cleaning. Specific lease language will differentiate what responsibilities fall on the landlord/lessor versus on the tenant/lessee for tasks such as:

• Maintaining the building
• Maintaining the specific tenant space
• Emergency repairs/maintenance
• Common area maintenance (CAM) and use

Are there specific lease obligations that may be more relevant during the COVID-19 pandemic?

Due to the nature of the virus, any lease clause concerning maintenance and cleaning of the building and tenant’s premises is relevant. Additionally, clauses concerning any “above and beyond” maintenance and cleaning are relevant.

For instance, specific lease language may include expenses that the landlord can choose to undertake but then pass on to the tenant — such as extra deep-cleaning that might be required during the pandemic (or at other times).

Are there any third-party agreements that should be reviewed?

Depending on the specific lease language requiring tenants to maintain and clean their own premises, any third-party agreements concerning the “Supplemental Cleaning of Tenant’s Premises” would be relevant. Other obligations with third-party contracts may include construction or renovations and other premises maintenance.

Most supplemental cleaning contracts can be terminated with 30 days’ notice, which means a tenant can potentially renegotiate scope and pricing changes depending on how the current situation develops.

What insurance provisions are included in leases?

Most leases contain requirements for both the landlord/lessor and the tenant/lessee to obtain and maintain certain insurance policies. While not all are applicable during the COVID-19 pandemic, some may be, depending on the exact policy and what coverage it includes.

Some policies — such as business interruption insurance — may help with rent, operational costs, lost profits, and similar issues. However, the policies must have been put in place prior to the current COVID-19 pandemic.

What is a business interruption insurance policy?

This is usually an add-on to a business’s property/casualty insurance policy to cover loss of business income in a disaster that is covered by the main property/casualty policy. However, since it is usually applicable to a natural disaster or fire, the policy would have to be reviewed and interpreted to determine if the current COVID-19 situation is covered.

Do government orders, regulations, or laws concerning COVID-19 take precedence over lease provisions?

Any government order, regulation, or law issued concerning the pandemic may take precedence over any lease provision. This could include anything from the payment of rent and the status of evictions to the physical use of buildings.

For example, the governor of New Jersey issued a lockdown order for nonessential businesses, requiring them to close to the public. But whether this action cancels lease performance or obligations would depend on the specific Force Majeure language contained in the lease.

As time goes on, there may be additional government actions that supersede any lease language to allow for delayed performance and even delayed evictions. New York, for instance, delayed all commercial lease evictions until at least June 20, 2020, and there are proposals to consider delaying rental payment obligations for 90 days.

What is a Continuous Operations clause?

A Continuous Operations clause is lease language that requires a retail tenant to be open and operational for a certain number of hours per day and/or days per week. This provision generally applies to retail tenants, although it does not necessarily appear in all retail tenant leases. The provision is rarely found in other commercial tenant leases.

Are there exceptions to a Continuous Operations clause?

Specific lease language may give exceptions, such as Force Majeure events, that allow for not continuously operating. But again, this depends on the specific language in the lease. In most cases, Continuous Operation provisions still require payment of rent.

What are some other lease provisions that may be relevant during COVID-19?

• Notice provisions provide guidance for ensuring that notices between tenant and landlord are legal and binding — for example, regarding lease renewal, lease termination, lease options, and general requirements for providing official notice of any action to the other party.
• Gross-up provisions state that if a building is shut down for an extended period, landlords must credit back the costs of any unprovided services when issuing their year-end reconciliations. Tenants should keep an eye on this issue when reviewing their year-end statements.
• Percentage or profit-sharing rent provisions specify a rent charge based on the gross income of the tenant rather than a fixed monthly or annual value.

Get Help from the Experts

Your legal advisor and accounting advisory partner can both help you understand how lease provisions may pertain to COVID-19 and result in lease concessions and other changes that will affect your lease accounting.

In addition, a lease accounting and administration software solution such as Visual Lease can help during this process — providing abstracted clauses and tools for organizing your lease data.

Visual Lease is providing the information above for informational purposes only and should not be construed as legal or accounting advice.

The COVID-19 pandemic has impacted every company in some way. With “social distancing” and all the emergency regulations that are in place, many offices and nonessential businesses are shut down entirely — or at the very least, their brick and mortar locations are closed while employees work from home.

One of the business effects of COVID-19 that does not get a lot of attention is its impact on leases and the related financial obligations. Whatever leases a company holds — not just for office, warehouse, manufacturing, or retail spaces, but also for equipment, vehicles, and other assets — the pandemic-related shutdowns complicate lease obligations and the associated lease accounting and administration.

What should you look for in your leases to understand your obligations and manage costs?

1. Review Your Leases to Know What You Owe, and When

Although many companies are not using their leased assets while business is “on hold”, they may still be required to pay rent through the end of their lease terms, as well as any other costs spelled out in their lease agreements.

That is why now more than ever, it is critical to understand exactly what is in each of your leases and make sure you don’t miss payments and important events during closures or cutbacks due to COVID-19. Otherwise, you could be subject to late fees or nonpayment penalties — or worse, face eviction and still have to pay the rent.

What to Look for in Leases

The table below shows some examples of categories, events, and obligations to look for and review in your leases — given there may be changes to how and if your business is using leased assets.

Every lease will have different language, obligations, and consequences for the lessee/tenant and for the lessor/lease holder — and few, if any, probably anticipated anything quite like COVID-19.

2. Evaluate Your Lease Financials and Options Under COVID-19

With the timetable to get “back to normal” still to be determined and so much that remains unsure, it is also important to conserve business spending wherever possible.

For instance, now is a good time to print out a general ledger to date and review all of the recorded transactions to get an overview of your current expenses. You might even find some unnecessary or optional recurring charges you can cancel or put on hold.

In addition, by understanding your leases and being clear about your rights and obligations, you may be able to find areas where your company can avoid overpaying or incurring additional fees during this time.

Where You Might Save

For example, part of your monthly rent may go toward front-desk/lobby security or other services you are no longer receiving because the building is closed. If so, you may be able to negotiate with the lease holder for a lower monthly payment.

Or, your building may be reopening with some restrictions and now requires more intensive cleaning and sanitation in all public areas. Are you obligated to pay that additional cost under the term of your current lease? You’ll want to check before you agree to pay anything extra.

Does your lease include any language around rent abatements or what happens if the space cannot be used due to circumstances beyond anyone’s control (Force Majeure)? Ideally, your leases are clear and thorough — though, of course, even the best lease cannot include every “what if” scenario.

When an area of cost concern is not covered in a lease, having a good relationship with the lease holder will improve your chances of being able to negotiate a term that will satisfy both parties.

Reflecting Changes in Your Lease Accounting

If you cannot get out of a lease and must abandon an asset, you will need to write down its value over a short period of time while still retaining the liability and making the payments. If the landlord will let you out of the lease, you will need to account for any termination fee you pay, as well as write down the asset and the liability in your lease accounting.

In these and other circumstances,you can account for changes in lease payments, such as the remeasurement requirements for abandoned or terminated leases.

Next Up: How These Changes Will Affect Your Lease Accounting

In this series of blogs, we will talk about the impact of COVID-19 on lease obligations and your lease accounting practices moving forward.

In the meantime, if you have a lease accounting system already in place — or better yet, a lease management solution that combines lease accounting and administration functions in one system — you have tools that will make it easier to identify your current lease obligations and understand their financial implications.

In an act of relief for companies during the coronavirus pandemic, the Financial Accounting Standards Board (FASB) recently voted to propose a one-year deferral of major accounting standards, including ASC 842 (Leases). This proposal would allow private companies an additional year, on top of the initial delay that went into effect October 2019, to adopt the lease accounting standard in their financial statements. Public not-for-profit companies who have not yet issued financial statements would also be granted an extension.

In light of the coronavirus outbreak and its impact on the global financial market, we support FASB’s decision to defer compliance for this additional year.  Organizations are reeling from the impact of COVID-19, and this deferral would relieve pressure regarding ASC 842 compliance and give them time to focus on the operational and financial challenges posed by the crisis.

COVID-19 Has Exposed Inadequate Lease Controls

Delaying the compliance deadline will also give organizations needed time to pull together the information needed to meet ASC 842 as well as provide them with much-needed control over their lease obligations. COVID-19 has brought to light significant inadequacies of existing controls surrounding lease agreements. In an effort to find liquidity and reduce expenses, companies have been examining their leases to understand their options. What they are finding is that they cannot get clear-cut answers about their rights and obligations. How their leases address defaults, terminations, options, rent abatements and other issues can make a huge difference in how companies pivot in this environment.

Extra Time Is Needed to Gather Information

If the ASC 842 deadline is pushed out, companies should take advantage of the extra time to collect, organize and summarize their lease information as well as schedule out their rental obligations.  Figuring out lease rights and obligations across a real estate or equipment portfolio is incredibly time-consuming, and is best done when resources are available. Public companies had a difficult time gathering needed lease information as their ASC 842 deadline approached at the end of 2018, and had to rely on expensive consulting firms to get it done. In fact, the difficulty public companies experienced was the primary reason FASB decided to push the deadline last October. Private companies, who have fewer resources and smaller budgets, should take heed and avoid that trouble.

Tighter Lease Controls Provide Liquidity and a Strong ROI

Furthermore, organizing leases now will give them earlier control and reduce costs along the way. Especially for companies utilizing lease management software solutions like Visual Lease, adopting tighter lease controls has an exceptional ROI. Through tight management of leases, customers are able to avoid costly penalties, act in time to exercise options, prevent rent overpayments, aggregate and refinance leases and optimize their portfolios. As we have seen over the years, given the expensive nature of real estate and equipment leases, any one of these benefits can save thousands to millions of dollars.

Compliance with ASC 842 is no small undertaking, and continued action and momentum towards compliance is best practice. Our recommendation is to not look at a deadline deferral as another reason to push the work further down the road. Instead, companies should work diligently, taking advantage of the additional time to gather their lease information, better manage their portfolio and reduce costs.

With all the new lease accounting rules you have to contend with — whether you follow ASC 842, IFRS 16, or GASB 87 — the prospect of generating lease accounting disclosure reports can be intimidating. In this blog, we look at three simple but vital things to keep in mind as you gather lease data and think about how you will comply with the latest lease disclosure reporting requirements.

1. Lease accounting disclosure reports now require more detailed data.

The Financial Accounting Standards Board (FASB), International Accounting Standards Board (IASB), and Governmental Accounting Standards Board (GASB) created ASC 842, IFRS 16, and GASB 87 respectively with the same goal: to provide insight into an organization’s leasing activities and greater visibility into its assets and liabilities.

Where leases previously were mostly on the income statement or just a footnote, today’s lease accounting standards require those assets and liabilities to be brought onto the balance sheet — creating a far more thorough picture of an organization’s finances. Under ASC 842, IFRS 16, and GASB 87, an organization’s lease accounting disclosure reports must now provide:

• More detailed qualitative and quantitative information about leases, such as cash outflows and values of right-of-use assets
• Significant judgments made in measuring leases
• The amounts recognized in the financial statements 

These new standards require you to gather a large amount of data to generate quantitative lease accounting disclosure reports related to real estate, equipment, vehicles, land, and any other leases your organization might hold.

Among other things, you will need the various inputs that are created by your amortization schedules and right-of-use (ROU) or leased asset and liability balances. You will also need access to the data points in those schedules, as well as the ability to pull out relevant values on liability and cash flows.

Lease accounting disclosure reports may also require qualitative information such as the terms and conditions of leases, assumptions used in applying the lease standards, and certain elements outside of the lease liability.

Trying to input all the pertinent lease information and track it using a spreadsheet or other manual method is no match for the kind of reporting requirements these new standards require. Thankfully, that is where lease accounting technology plays a vital role in disclosure reporting.

2. Accurate lease accounting disclosure reporting depends on software.

Lease accounting software streamlines the disclosure reporting process by providing a secure and efficient system for organizing lease data, to make sure that key information is properly compiled and disclosed. 

The right lease accounting software solution helps you capture all the necessary data, track changes, and report lease costs in accordance with both your accounting policies and procedures and the latest accounting standards.

In addition, a lease accounting solution further streamlines this very complex process by providing automated calculations and workflows that improve lease accounting disclosure reporting in several crucial ways:

• Ensuring the accuracy of disclosure reports by providing a single-source, centralized system for inputting, storing, tracking, and managing all lease data
• Properly accounting for nuances within leases through configurable reporting and calculations, ensuring that assets are consistently accounted for
• Eliminating human error and reliance on formulas to further ensure accuracy by having all your data points and calculations already in the system
• Integrating to the balance sheet, allowing each type of lease and related information, including ROU assets, interest expenses, and liabilities, to be brought into the balance sheet
• Providing visibility into important qualitative lease details such as terms, changes and dates

Beyond achieving compliance with lease accounting disclosure reporting requirements, you can also opt for an all-in-one lease management system that combines lease accounting and administration. Such a system provides full lease accounting capabilities along with administration functions for day-to-day, ongoing lease management.

To learn more about what to look for in a lease accounting solution, read A Complete Guide to Lease Accounting.

3. Disclosure reporting requirements depend on which standards you must follow.

While ASC 842, IFRS 16, and GASB 87 differ in the types of organizations they apply to, there are some similarities in their disclosure requirements. For example, GASB 87 was created for use by state and local governments in the United States, while ASC 842 is for public and private organizations in the United States and IFRS is for international organizations.

However, across all three standards — ASC 842 disclosure reporting, IFRS 16 disclosure reporting, and GASB 87 disclosure reporting — the key requirements include the following:

• Information about the nature of an organization’s leases (including subleases)
• Leases that have not yet commenced
• Significant assumptions and judgments
• Amounts recognized in the financial statements
• Maturity analysis of liabilities
• Lease transactions with related parties

While ASC 842 makes U.S. financial reporting more consistent with the international requirements, and ASC 842 and IFRS 16 disclosure reports are very similar in format and content, there are also some important differences to keep in mind.

For example, where ASC 842 classifies leases as either operating or finance, all leases must be accounted for as finance lease under IFRS 16. In addition, ASC 842 and IFRS differ in how a short-term lease — one with a term of 12 months or less — is defined when transitioning an existing lease to the new standards.

Under ASC 842, the lease’s term is determined by the original commencement date. So, for example, a 10-year lease that has only 6 months left on it at the time of transition would still be considered a long-term lease.

However, under IFRS, an existing lease’s term is based on how much time remains when the transition occurs. Therefore, a 10-year lease with only 6 months remaining at the time of transition could be categorized as a short-term lease for purposes of disclosure reporting. Additionally, IFRS 16 provides guidance for so-called low value leases, allowing them to be grouped and treated similarly on the disclosure report.

Unlike GASB 87, where practical expedients are not optional, both ASC 842 and IFRS 16 require disclosure reporting to include which practical expedients an organization has elected to apply to its lease accounting, including:

• Practical expedients related to short-term leases
• Those related to separating lease components
• Election of transition-related practical expedients
• Election not to restate comparative periods upon adoption

With more comprehensive and complex requirements for lease accounting disclosure reporting, ASC 842, IFRS 16, and GASB 87 certainly present new challenges to accounting teams. However, with the implementation of lease accounting software and more efficient accounting practices, these new disclosure standards promise to deliver clearer, more accurate, and more useful financial statements.

As of the beginning of this year, GASB 87 lease changes have gone into effect. These new lease accounting rules have a substantial impact on government entities and public institutions in higher education, healthcare, and more. 

Many organizations, however, are woefully underprepared for GASB 87 compliance. Accounting departments need to understand the extent of their lease portfolio, the data they need for lease calculations, the new accounting methodology required, and how to stay on top of any future lease account changes.

If your organization is impacted by GASB 87 lease accounting changes, here are four crucial things to consider while you work towards compliance.

1. Understand your lease portfolio

For many organizations, getting an accurate picture of the leases they’ve accumulated over the years is a massive burden. Often times, companies have leases across all departments — from IT equipment to office spaces and company vehicles — that are tracked and managed amongst a disparate set of systems. That means you’ll need collaboration across the entire organization to track down all possible sources of leases. Having a centralized view into all of your organization’s leases, however, is crucial for GASB 87 compliance. 

When you’re organizing your lease data and documentation, you need to understand, not only what types of leases you have, but whether they’re required to appear on the balance sheet as well. That’s because GASB 87 differs from ASC 842 and IFRS 16 when it comes to short-term leases. For example, under GASB 87, if there is any option to extend a lease past 12 months, regardless of the likelihood to exercise, it is not able to be considered a short term lease. Luckily, GASB 87 lease accounting software can streamline the process of organizing your lease portfolio and understanding how this information needs to be reported on your financial statements.

2. Know what lease data points to collect for GASB 87 compliance

Along with changes to how leases appear within financial statements, GASB 87 lease accounting rules specify new requirements for lease calculations. In order to prepare these calculations, you’ll likely need to collect many different data points across various areas of your organization. Tracking down and extracting these additional data points requires careful planning and communication between many departments within the organization.

In the longer term, capturing this data in a centralized software solution is crucial for minimizing the complexity of lease reporting and ongoing management. That’s why choosing a GASB 87 lease software solution that’s configurable for tracking data points specific to your needs and highly interoperable with other business applications can dramatically streamline lease data collection for your organization. The right lease management software should integrate with leading business systems that various departments within your organization are already using to share and aggregate relevant leasing data. When it comes time to prepare your financial statements, you’ll know exactly where to find the information you need to accurately report your leases under the new requirements.

3. Understand the changes to the balance sheet

The primary goal of the new GASB 87 lease accounting rules is to make leases more transparent within financial statements by including the majority of them on the balance sheet. 

For lessees, that means recognizing a lease liability for the present value of the total expense commitment and an intangible asset equal to this lease liability as well as any payments made at the commencement of the lease. As payments are made towards the lease, the liability is reduced and interest expenses are recognized on the income statement. The amortization of the asset and interest expenses are front-loaded, meaning more is recognized in the beginning of the lease term. There are also additional disclosure reporting requirements, which includes lease descriptions, payment schedules, and the amount of total leased assets.

Lessors must recognize a lease receivable equal to the present value of the lease payments expected to be received over the lease term, and a deferred inflow of resources equal to the lease receivable and any additional payments at or before the commencement of the lease. This deferred inflow is recognized as revenue over the life of the lease. As the lessee makes payments, the lease receivable is reduced, and interest income is recognized. Lessors must also include descriptions of leases, lease revenue recognized in the reporting period, and revenue from variable payment components in the disclosures as well.

The GASB 87 lease accounting changes may sound complicated, but a lease management solution can automatically generate these journal entries and additional disclosure reports to simplify the preparation of financial statements. That means organizations that are impacted by GASB 87 can quickly meet the new ongoing accounting and financial reporting requirements.

4. Stay on top of lease changes 

When it comes to meeting the GASB 87 lease changes, it’s not just a one-time event. You’ll need to continually manage leases — and their relevant data points — as leases get added, renewed, or cancelled. In addition, payment amounts change with variable rent leases, and other events can impact lease calculations in the future. Managing these changes to your lease portfolio on a day-to-day basis is time-consuming without the proper systems and processes in place.

Most organizations, therefore, need a way for the people who manage leases to modify this lease data from a centralized and intuitive lease management solution. The reality, however, is that many accounting and leasing systems can’t provide these capabilities out of the box. And those solutions that do meet today’s GASB 87 compliance needs aren’t innovating for the future. 

If your organization will be impacted by the GASB 87 lease accounting changes, consider a solution like Visual Lease to make compliance straightforward for the long term. Visual Lease has the capabilities necessary for achieving lease compliance, streamlining monthly reporting, and maintaining your lease portfolio. That’s because it’s an intuitive lease management platform that provides seamless integrations with a variety of third-party business applications.

But don’t take our word for it. If you want to see for yourself how Visual Lease can streamline your lease management and compliance requirements, schedule a free demo now.

How often do you have this experience when evaluating enterprise software? The vendor gives a demonstration of an amazing solution, walking you through complex tools that do exactly what you need. You say, “This is perfect! Can you give me a price?”

First, they give you pricing for the bare bones model. Then, you find out that what they showed you involves a lot of add-ons to the platform. None of it is standard and every extra thing – from fields that you need, to reports – is going to cost you. 

That’s a common frustration to come across when evaluating software vendors. Systems that lack configurability are expensive, time-consuming to implement, and cumbersome to update when you need a small change.

Wouldn’t you rather get everything you need right out of the box? When it comes to lease accounting and management software, you can, if you know what to look for. In this article, we’ve laid out desired configurable enterprise lease accounting software you need.

What you see should be what you get

Software customers shouldn’t have to jump through hoops to get a system to work how they need. A good lease accounting system should make your life easier – and be configurable to meet your needs. 

When looking at different lease software providers, they all claim to be customizable. However, when you dig deeper, you’ll find out their system contains only surface-level customizations at best.

At Visual Lease, our solution is designed to be flexible and scalable for all customers. Every customer coming to us from any industry can have a system that meets their unique needs without paying extra to get it.

If you want a truly flexible system that works how you need it to, and will serve your business for many years to come, here are the specific features to look for:

1. Look for a truly configurable database

Every organization has different lease information that they need to track. Manufacturing companies with leased warehouses will need to track the number and height of bay doors. Retail franchise groups need to track the brand associated with each retail location. They may also have leased vehicles that need to be associated with a location and a manager. Hospital groups may want to track the originating parent company for each facility.

These are just a few examples, but I’m sure your organization has similar necessities that are not part of the typical lease data tracked by “canned” lease software. When you think through everything you’re currently tracking (or would like to track all in one place), you’re going to need more than just a few uniquely tailored fields specifically to your business.  

What you need is a software product that has been designed from the database level to be completely configurable. With that capability, there’s no need to give up what you are looking to track and try to force your business into a one-size-fits-all model.

With Visual Lease, you not only get a flexible system, but you get one that is entirely configurable for no additional cost. Our implementation team helps you through the initial setup, but also teaches you how to tweak the system yourself when the inevitable changes happen in your business, so you can always have the data you need at your fingertips.

2. The importance of ad-hoc reporting

With any lease software, you’ll get what looks like an impressive collection of standard reports. But as you begin to use them, you’ll realize you need to make changes. You’ll want the reports to reflect your own terminology, your organizational structure, and your leasing policies and practices – not to mention the look and feel of your brand.

The last thing you want is to have to go back to the vendor (or a consultant) and spend a lot of money on report customizations. Oftentimes, software companies will provide you custom reports – for a cost. Why would you want to pay for exporting your own data in a way that makes sense to your business? 

Instead, look for lease software with an ad-hoc reporting tool that makes it quick and easy to create your own data visualizations and reports. 

With Visual Lease, you can query ANY lease information that you’re tracking in the system and group, subgroup, and filter the data any way you choose. Even better, you can do it with a tool you already know: Excel. You can save reports, add to a dashboard, or export and format with templates to create a branded look. 

3. Flexible user access & security 

For comprehensive lease software that manages the entire lifecycle of your leases (including administration and accounting), you’ll likely need to provide different levels of access and control for people with different responsibilities.Some examples of user roles and access include:

• Multiple levels of administrative access, rather than a single administrator
• A separation of roles and associated access rights within the various parts of the lease system
• The ability to create groups based on roles with pre-assigned permissions
• The ability to control certain rights at an individual level

You’ll also want to control login credentials and create passwords that match your corporate password policy. You might want the extra security of using multi-factor authentication, or you might want to tie into your organization’s existing Single Sign On (SSO) to authenticate users.

4. Adaptable implementation services

When you work with a vendor to implement software, how does the process begin? In most cases, you’ll hear about cloned steps they take with every customer.

When you’re getting a more customizable product, the process will start with a conversation about your goals and how you want to use the system.

For example, the implementation team should ask about the systems you’re using now. Obviously that conversation will include your AP/GL, but should go beyond that to discuss other systems that you need to integrate with, or tools that you’re replacing. What’s working well that you would like to replicate in your new comprehensive lease management system? 

The team should work with you to create what we like to call your “blue sky vision” of your ideal solution.

Accounting strings are a great example of an essential customization that your implementation team should set up for you. Every large organization has a unique coding system for invoices that allow the financial team to identify who owns that invoice, who is responsible for paying it, and where it belongs in the budget. That code should follow every lease-related expense and journal entry. 

Your implementation team can work with you to concatenate information from various lease data fields (often including custom fields) to create custom accounting strings that match your coding system. 

5. An all-inclusive price

Let’s be realistic: even the easiest to use lease software requires implementation services to help you get your data into the system. You’ll need training for administrators. And you’ll need ongoing support when questions come up.

Many (if not most) solution providers nickel and dime you for every service they provide on top of the product itself.

Here at Visual Lease, we feel that “software as a service” means you should get the services you need included with the software. That means implementation services, training, and help desk support are all included in the price you pay for our product.

People are always surprised when they ask about extra charges and we say, no, this is all included as part of the system.

Want to see for yourself? You can be confident that what you see will be what you get, all at a reasonable and predictable price. Schedule a demo now!

As the standard for lease accounting software, Visual Lease provides the tools you need to achieve compliance. We make it easy to track, report, and manage your lease finances within our system – and we’re extremely passionate about delivering an incredible user experience.

It’s our mission to simplify how companies manage their leases and associated finances, but there’s so much more to gain as a Visual Lease customer – from saving time, to simplifying difficult tasks and jobs, eliminating stress and headaches, and providing answers when they’re needed.

Our newest campaign, Compliance Plus, represents the many extra benefits of using Visual Lease, and demonstrates our promise to give you confidence, efficiency, and flexibility, which are just as important when doing your job.

Confidence

Wouldn’t you want to feel more confident knowing you have all of your leases properly accounted for, organized, and identified within one location?

The strength of consolidating all real estate, equipment, vehicle and other leased assets makes all the financial reporting and compliance requirements much more reliable.

Efficiency

Our lease accounting capabilities consistently classifies leases, runs calculations, and computes right of use (ROU) asset values, along with liability schedules, so you can more easily achieve accurate results, saving you time and frustration of performing tasks manually.

Flexibility

Every field within the platform is configurable, allowing your platform to reflect your unique needs. We recognize the need to capture various data points in different ways, and have made it simple for you to do so, while avoiding costly customizations.

These benefits of our software go beyond compliance, and are all time-savers and cost-savers for your business. With Visual Lease, you will not need to worry about maintaining confident, efficient, and flexible. We take the complexities out of lease accounting, so you can get back to focus on what you need to do to do your job.

“We are thrilled to welcome Clark to the Visual Lease team. Visual Lease will benefit immensely from his experience navigating the rapid growth of a SaaS category leader,” said Marc Betesh, CEO and Founder of Visual Lease.

Convery has over 15 years of strategic and operational SaaS experience across sales, pre-sales engineering, implementation, customer success, consulting, and project management. He spent the last eight years at iCIMS as an integral member of the executive leadership team that navigated the company’s dramatic growth.

“I am thrilled to join Visual Lease as it cements its market leadership position in lease management and accounting SaaS. The combination of a best-in-class product and an outstanding customer-centric culture positions Visual Lease as the market-leading solution in this rapidly growing industry,” said Convery.

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VISUAL LEASE, LLC

Visual Lease provides lease accounting and lease administration solutions to help companies manage, analyze, and report on their leased asset portfolios, including real estate, equipment, and more. The company’s SaaS platform combines GAAP & IFRS-compliant lease accounting controls with sophisticated and flexible lease portfolio administration. Over 500 of the largest publicly-traded and privately-owned corporations, retailers, hospitals, and institutions around the globe rely on Visual Lease’s cloud-based SaaS platform to meet operational and compliance requirements. For more information, please visit www.visuallease.com.