12 Step Lease Accounting Project Charter - pronexusllc.com · 12 Steps for Lease Accounting...

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12 Step Lease Accounting

Project Charter

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12 Steps for Lease Accounting Compliance

1. Obtain a full understanding of ASC 842 and/or IFRS 16 and raise internal awareness

2. Set a compliance timeline

3. Identify and meet with a cross-functional group of leasing stakeholders

4. Create and meet with project team

5. Decide if a software solution for lease management and reporting is needed, if not

what is alternative?

6. Compile a list of all contracts and determine if they contain leases

7. Evaluate compliance with existing ASC 840 accounting standards

8. Evaluate the FTE requirements and evaluate staffing/training plans as needed

9. Establish internal accounting policies around leasing

10. Evaluate the process flow for leases and adjust to ensure efficiency

11. Review processes, software, policies and pro-forma results with auditors

12. Set up a sustainable process for managing leasing data

585-662-2212 | www.pronexusllc.com

http://www.pronexusllc.com/

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1. Obtain a comprehensive understanding of ASC 842 and/or

IFRS 16 and raise internal awareness


What Exactly Is a Lease Under ASC 842 and IFRS 16?

• Virtually all leases will need to be recorded on the balance sheet

• There are some complex changes in the new rules, and all

companies should leverage the knowledge and expertise of subject

matter experts for complete compliance.

• Set up training sessions and share insights.


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2. Set a compliance timeline


• Most companies will need to be in compliance by the end of 2018 with

data going back to early 2017

• Many company-specific details of the new standards can affect

compliance timelines

• Some companies may find it is advantageous to adopt new standards

early


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3. Identify and meet with a cross-functional group of leasing

stakeholders


• Leasing has been a traditionally

decentralized process

• Centralizing lease data will be

key to success

• Communicate early to obtain

buy-in from all stakeholders

Groups to consider including in stakeholder

meetings and communications:

• Real Estate

• Property Management and Lease

Administration

• Maintenance

• Logistics

• IT

• Procurement

• Legal

• Financial Planning

• Accounting

• Treasury

• Program or Project Management


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4. Create and meet with project team


Accounting

• Due to the subject matter and the requirements for

financial reporting

Information Technology (IT)

• Because the solution will likely involve

implementing new software

Program and Project Management

• To add expertise in keeping the project on

track/budget

Property Management and Lease Administration

• Because of interest in solution selected and will

most likely be responsible for some data input, set

up and new leases going forward


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5. Decide if a software solution for lease management and

reporting is needed, if not what is alternative?


• Standard, Ad Hoc and Custom Reports?

• Audit trails of data changes?

• Cost for future upgrades?

• Cost for unlimited users?

• SSAE16 audits annually for SOX?

• Ingrate with ERP and IWMS systems?

• Software recommended by CPA firms?

• Proven FASB and IASB functionality?

Critical questions to assess software:


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6. Compile a list of all contracts and determine if they contain leases


• Legacy real estate system

• SharePoint sites or other repositories of

scanned agreements

• Fixed asset records (for existing capital

leases)

• Surveys sent out to the field asking for

units to identify leases under their

control

• Lease footnote and disclosure work

papers from previous years

Determine sources of lease data. May include, but not limited to:

• File cabinets and desks (many companies

have a large portion of leases still in paper

form)

• Lessor vendor software (some vendors have

online tools available for tracking leases)

• P&L (locating lease expenses in the financial

statements and tracing them back to the

source may be the best way to identify some

leases)

• Legal department hard copy files


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Don’t forget embedded leases!

6. Compile a list of all leases


• Agricultural Equipment

• Alarm Equipment

• Buildings

• Communications Equipment

• Conveyor Belts

• Easements

• Forklifts

• Janitorial Equipment

• Laptops

• Medical Equipment

• Music Equipment

• Pallet Jacks

• Real Estate

• Aircraft

• Audio Visual Equipment

• Computers

• Containers

• Copiers

• Exercise Equipment

• IT Equipment

• Land

• Manufacturing Machinery

• Medical Technology

• Office Equipment

• Rail Cars

• Restaurant Equipment

• Retail Equipment

• Right of Ways

• Scissor Lifts

• Servers

• Towers

• Transportation Equipment

• Vehicles

• Retail Racks and Shelving

• Rolling Stock

• Semi-Trucks

• Software

• Trucks

• Vessels


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7. Evaluate compliance with existing ASC 840 standard


• Preparing for the new lease accounting rules may expose compliance

issues with current requirements

• Keep materiality (financial significance in terms of GAAP) in mind

• Understand the impact to practical expedients

• Review with auditors


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8. Evaluate the FTE impact and evaluate staffing/training plans


• Ensure accounting staff can

handle compliance tasks in

addition to regular duties

• Consider hiring additional

resources or consultants for

the project

• Consider training needs to

implement new processes


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9. Establish internal accounting policies around leasing


• New standard is more principles-based and will require more robust

company policies and controls

• Set new policies and discuss with auditors


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10. Evaluate the process flow for leases and adjust to ensure efficiency


• Consolidating and organizing lease

data helps ensure lease data

reliability

• Ensure leasing practices are efficient

and eliminate waste

• An efficient lease management

process can produce cost savings

and better negotiating leverage with

vendors


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11. Review processes, software, policies and pro-forma results with auditors


• Audit teams can add expertise for project success

• Reviewing early with audit associates can save time during the next

annual audit


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12. Set up a sustainable process for managing leasing data


• Leasing will continue to be a

valuable practice for business

operations

• Existing leases will need to be

maintained and new leases will

need to be set up

• Give some thought now to

sustainable and efficient process


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How ProNexus Can Help:

ProNexus can assist clients in a variety of areas including but not limited to the following:

• Developing and/or directing the initial Project

Plan and implementation thereof

• Understand the accounting requirements and

lease population

• Assessing current state processes,

information requirements, and capabilities of

existing technology

• Impact on financial statements and

covenants

• Lease data gap analysis

• Provide resources or loan staff augmentation

to support your implementation

Book a intro call with ProNexus today!

[email protected] | 585-662-2212

www.pronexusllc.com


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12 Step Lease Accounting Project Charter - pronexusllc.com · 12 Steps for Lease Accounting...

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