How to find the best lease accounting solution for your business?
After the new accounting standarts IFRS16 / ASC842 / AASB16 came into effect bringing big changes to the balance sheet, many companies, having large portfolios of operating leases were influenced by this change. Meeting the requirements and staying compliant with the standart is not easy. It requires time, careful planning and execution, but with the right lease accounting software and help in place, compliance can be much easier.
Of course, finding the right product for your business is not easy, so we do our best to help you make an informed decision. In this post you will find all relevant information related to lease accounting software.
Lease accounting software helps in everyday tasks
Lease accounting software helps you manage company‘s transition to IFRS 16 / ASC 842 / AASB16 standart without a headache in lots of different ways. Firstly, it provides necessary tools for a smooth and quick execution of technical, routine tasks. It saves employees‘ time and your money by reduce cost and risk of manual work. Whether you have 100 or 3,000 agreements – lease accounting software can help you manage your lease accounting effectively.
Systems lets you keep the lease agreement data in one place, no matter how many different lease agreements, statuses or lessors you have. Previously it was a real headache for your administration and finance departments, but now lease accounting software keeps everything in place and there is no confusion. Lease agreements at the database are divided by three major statuses – new agreements under consideration, active leases, archived leases (expired, or terminated early) and all data is accessible by everyone who has been given a permission.
If you need to amend any data on your active lease, you will be able to do it with just a few clicks. The system keeps an audit trail of all changes made, so you can feel sure that all of your active lease data will be transparent. In addition, talking about data and transparency, all information about lessors could be stored at the special database too. Here you will find their contact details and a lease portfolio for lessors so any piece of information could be found within seconds.
Lease management accounting tools for any need
All your data in one place is good, but automatic tools who complete some tasks instead of you are even greater. With lease management accounting tools, you will not have to calculate lease liability or Right of Use Asset manually anymore.
According to the new standards, lessees are required to recognize almost all lease agreements they have on the balance sheet. Based on the given parameters, the system calculates lease liability as the present value of the lease payments and the present value of amounts due at the end of the lease term, considering purchase or termination options.
In addition, lease management accounting tools calculate the initial measurement of the right-of-use asset, which consists of lease liability, lease payments made on or before the commencement date of the lease, any initial direct cost incurred by the lessee, estimate of cost of dismantling/restoring the asset at end of lease.
What is important, as circumstances change, the system can calculate adjustments to lease liability and right-of-use asset value, and produce General Ledger postings accordingly, so you will not have to worry about discrepancy of data.
Keep in mind that if you have leases with variable lease payments dependent on an index or reference interest rate, the system is able to calculate re-pricing and reflect it in accounting, but on the other hand, if they are not dependent – remember to exclude them from the calculation of lease assets and liabilities.
Integration with the General Ledger
Lease accounting software could be integrated with the company‘s General Ledger. That means you will have required G/L transactions at each due date and at the end of the accounting period, could download G/L transactions in detail or at summary level and feed them into your general ledger system.
Using General Ledger integration with the lease accounting software, the company can have an automatically produced file at the end of each accounting period. The file will be uploaded into the accounting system automatically. In addition, if you are using Microsoft Dynamics NAV or Business Central as your ERP system, then G/L integration is totally seamless. Lease accounting system helps to facilitate additional information regarding the scope of lease activities in your financial disclosures.