It’s well-known that the introduction of ASC 842, GASB 87, and IFRS 16 has had major reporting consequences for companies with off-balance contracts such as property lease contracts. In terms of the process, implementations have often been taking a long amount of time, approximately six to nine months. This is because the new IFRS, FASB, and GASB standards require the involvement of many departments; including property, finance, IT, and purchasing. According to JLL research, 52% of property managers indicate that up to a third of their data on number of buildings, square feet, use and costs are inaccurate.
This has a huge impact on the timely and accurate implementation of ASC 842, GASB 87, and IFRS 16 . In fact, without the correct data on property and lease contracts, a compliant and cost-efficient implementation of these standards are simply impossible. The answer lies in combining an Integrated Workplace Management System (IWMS) solution with ASC 842, GASB 87, and IFRS 16 compliancy within one solution. Why? In this blog I’ll touch on the main organizational benefits of this approach.
Clear overview of all contractual obligations
The main reason why organizations are interested in combining an IWMS solution with these compliances is centralization. Companies want a clear overview of all their contractual obligations in one system to enable them to report according to the requirements of these standards. After all, how can property and other business asset leases be added to the balance sheet as debt if it’s not clear which contracts have been set up where? Not only which contracts, but also with which parties, the contract duration, and the level of the rents. Without complete data on all leases, it is almost impossible to comply with ASC 842, GASB 87, and IFRS 16 in a timely and cost-efficient manner.
How new lease accounting standards will impact your business
A lot is changing in lease accounting with 2019 underway. Starting January 1, 2019 – FASB, GASB, and IASB have new standards. This immediately raises several questions regarding the journey to becoming compliant and how these new standards impact your organization. In this FAQ, we’ll provide some expert insight to put your mind at ease.Read more
Accurate, up-to-date information
For organizations that already lease their property, the implementation of an IWMS system in combination with ASC 842, GASB 87, and IFRS 16 is extra valuable. The more property leases, the greater the lease accounting impact, which significantly increases the urgency for correct accounting. In addition, many leases lead to a dynamic property portfolio that you must fully justify through disclosures on financial statements. This is only possible with accurate and up-to-date information about your entire portfolio and current leasing contracts, including contract duration and annual rent. This incorporates a periodic assessment of whether the use of options for extension or early termination is “reasonably certain.” Even without an actual change to the lease, “reasonable certain” affects the figures to be reported, and applies to both the leasing of property as well as business assets such as: cars, production equipment, and office facilities.
One single source of truth
An integrated software solution combines property management processes such as portfolio management, lease management, strategic space planning, and transaction management with a proven lease accounting solution for property and asset lease contracts. By combining these processes into one software solution, organizations benefit from a single source of truth and a 360-degree view of their entire portfolio. This allows property and finance managers to make informed decisions about their portfolio and lease strategies as well as deliver accurate lease accounting data from the same process.
Implementing these standards is an intensive job. However, by combining the standards with an IWMS, you will be able to gain some clear insight into a wide range of data about the entire lease portfolio; a precondition for timely and efficient compliance with these requirements.
Do you want to know more about ASC 842, GASB 87, and IFRS 16 compliancy, different methods of implementation, and the benefits of combining these standards with an IWMS? Please download our FAQ.