Overcoming the Challenges of Lease Accounting

As organizations work to master the complexities of the new lease-accounting standards (ASC 842 and IFRS 16) it’s important they not overlook the importance of having the right systems and software to make operationalizing compliance as easy as possible. Otherwise, three aspects of the new standards may create burdensome accounting workloads. First, under the new standards leases must be reviewed regularly. Changes in lease terms or even some business conditions require accounting adjustments and remeasurements. Second, the standards are designed to be principles-based. This gives businesses flexibility but requires enhanced centralized controls to ensure consistency of treatments and more detailed disclosures about how the standards are applied. Third, lease management and accounting processes must be better integrated to ensure accuracy and compliance. However, these processes typically are performed by separate departments and are likely to be decentralized.

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