<img height="1" width="1" style="display:none" src="https://www.facebook.com/tr?id=760207761035115&amp;ev=PageView&amp;noscript=1">

AMTdirect Insights Blog

ASC 842 Software vs. Lease Accounting Excel Templates

Lease accounting software vs. excel spreadsheets

Spreadsheets are the #1 tool in an accounting department’s utility belt.

That’s why they’re so tempting to use for lease accounting compliance. That and they're cheap, flexible and everyone knows how to use them.

But they do present a few problems.

In fact, we’ve debated the pros and cons of spreadsheets when it comes to lease accounting compliance again and again. But we’ve recently had the opportunity to ask real-life experts their honest opinions about the matter:

These experts from publicly traded companies that have finished the FASB ASC 842 implementation weighed in about the role of spreadsheets in lease accounting compliance. 

What they had to say sheds valuable new light on the topic. 

Excel Spreadsheets: Yes or No?

“Can I get by without lease accounting software?”

We hear this question a lot from smaller companies - typically in the private sector - who don’t have large lease portfolios. The truth is, it’s a loaded question. 

There are inherent risks in using spreadsheets for lease accounting compliance.

It’s not a set-it-and-forget-it standard. You’re going to have to monitor for reassessment triggers, modifications, and - of course - new leases. And there will be more to update on a go-forward basis. 

The second aspect to consider is the disclosure requirements. There’s a lot more information that’s required to disclose. If you’re using spreadsheets, you’re going to have to rely on formulas and linking throughout spreadsheets. 

There’s a lot that can go wrong. 

It’s something to keep in mind from a risk and resource perspective in terms of keeping up with spreadsheets on a go-forward basis.

 

CTA-Lease-Compliance-Kit

 

Spreadsheets Support ASC 842 Software

There have been large companies who considered using spreadsheets for lease accounting compliance. Some even went so far as to execute with spreadsheets alone.

The team at Element Solutions never entertained that option. 

Many of its team members have years of lease experience. They understand the complexity of the calculations that are included in the new lease accounting standards. Because of that, they moved passed considering spreadsheets in place of software quickly. 

Instead, they focused on how spreadsheets could help them get their software up and running more efficiently.

The team understood the focus should be using spreadsheets to gather inventories of leases to extract the data; organizing it in the way the software needed to have the data loaded; and building processes that matched the ongoing monthly routines needed to keep the database current.

 

Setting Yourself Up for Failure

Kennametal realized early on in researching the new lease accounting standards that doing it all in spreadsheets would be audacious, at best.

Just think about the volume of leases, the geographical spread, and the amount of hands involved from signing a contract to determining whether it’s a lease. You can probably imagine how quickly it could get out of hand managing it all manually via a spreadsheet. 

A more significant concern should be thinking past day-one implementation. 

You need processes and tools to make sure calculations are happening for new or updated leases automatically.

You also need to make sure you can accurately add new leases as they come into your portfolio and make any modifications or terminations. Training and designing internal controls over financial reporting to support those efforts should also be a priority. 

Doing any of this without software means a much harder time demonstrating to your auditors you haven’t misstated your lease accounting.

 

ROI-Calculator-CTA_v2-1

 

Choosing Your Lease Accounting Software

CFGI puts a lot of weight on choosing the right partner as soon as possible. It’s imperative in setting the tone for the rest of the project.

The first step is identifying your needs internally. It will help you tremendously as a part of your selection process to identify what software vendors are going to meet your needs and which ones aren’t. 

Next, come to an agreement with all your stakeholders, which is anyone who is going to potentially benefit from or use this software. 

Get their input. Find out what their needs are. 

Sometimes those needs are different than the accounting team’s. You may have to go to your lease administration team, real estate team, or other departments. There are multiple potential benefits from using a lease accounting and administration software. Make sure you’re all aligned. 

Also, understand that there are some providers who haven’t been around a long time. 

These vendors scrambled to put something together in order to offer their services to potential clients for the new lease accounting standards. Once you dig down another level, it’s easy to see that they wouldn’t be able to provide all the requirements you’ll need from a compliance perspective. 

Kennametal had to learn this the hard way. 

The company was working with a different partner for a different type of solution. That solution claimed one of its offerings was lease accounting. Long story short, it couldn’t live up to its own promises and Kennametal was forced to begin again, wasting valuable time and resources.

 

Favorite Software Features

Choosing a lease accounting software comes down to more than just cost. 

When it comes to choosing a solution, all the experts agreed on one thing: Robust reporting functionality was huge. For the accounting and finance teams, reports really go a long way in time savings and can provide a huge value-add.

Look for a lease accounting solution that can provide standard and custom reports. 

It’s also important the software is designed in a way that makes it highly configurable without any additional cost or programming. When you go to implement the software, you’ll want to get the look and feel of your company’s footprint quickly.

Keep the basics in mind, too.

These are things like an unqualified SOC report that, from a controls and audit point, you’ll get coverage on. Also consider industries each solution serves and what kind of expertise the vendors have with companies similar to your own. 

Finally, find a solid group of people to work with. Although the software is what you’re buying as a product, so much goes into it from a service standpoint. You want to work with a knowledgeable team that you can trust.

Find the partner who has the best mix of these factors when going through the due diligence process. That solution will undoubtedly provide you with the optimal value.

 

Conclusion: It’s a No Brainer

Only 26.3 percent of public company execs say their implementation of the lease accounting standard is complete, even though they were supposed to begin using it this year.

A large part of that may be because they decided to use spreadsheets instead of investing in lease accounting software.

Don’t make the same mistake.

One of the struggles a lot of companies face is having a theoretical grasp of the new lease accounting standards, but not a practical understanding. 

This was especially true early on, when no one had really loaded a balance sheet or started to go through the monthly roll forward process of figuring out how to keep the portfolio current. 

But now we have the advice of consultants and public companies who’ve gone through the process. Everyone has a better grasp of what’s ahead. 

There’s no excuse not to be prepared.

This is especially true for private companies, who most likely have a deadline delay in their favor. In fact, to help you prepare, we created a slew of resources including an ROI Calculator, a Lease Accounting Compliance Readiness Kit and an hour-long webinar with the experts featured in this blog post.

And you can always reach out to our team of lease accounting and lease administration experts. We’re happy to help break down the new lease accounting standards and how they will impact your specific organization! 

AMT_Demo_CTA

 

Posted on 10/7/19, 7:00 AM by Taft Tucker in Lease Accounting

Taft Tucker

Written by Taft Tucker

Taft is the Chief Customer Officer at AMTdirect and is a resident expert about lease administration and accounting. Taft's passion is to share practical, helpful information about our industry.