STRATEGY POLICY INVENTORY DATA
SYSTEM PROCESS
CONTROL SUSTAIN
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ROAD TO LEASE COMPLIANCE
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DATA
Most legacy lease administration and accounting systems captured a sub-set of
the required fields and are missing items such as fair market value, economic
value and residual values to name just a few. The bottom line is you'll need to
touch all leases to abstract this missing data. Finding a credible abstraction
partner who has experience with the new FASB/IFRS data needs is paramount.
Non-real estate leases, such as equipment
leases and service contracts
If you thought real estate leases were challenging, wait until you try and
tackle the non-real estate variety. Combing through all enterprise contracts
and agreements to determine if they should be classified as a lease, and then
abstracting the necessary data elements to run the lease accounting calculations
can be a daunting task.
The best practice here is to develop a standardized contract assessment protocol
to apply to each contract. The good news is non-real estate leases have less
data to abstract, the bad news is you may have more non-real estate leases
than real estate ones. Regardless, make sure to collect data consistently and in a
singular structure that can be easily loaded into your centralized database.
Data in some systems may not have been
subject to SOX compliant internal processes
Given the highly decentralized way leases have been managed historically,
control-based compliance for leased assets was out of the reach of most
financial teams. The new lease accounting standards require a centralized
system to manage lease administration and lease accounting, which in turn
provides Accounting with the opportunity to improve their process controls to
meet SOX audit requirements. Real estate, equipment and embedded leases
often need different controls which is one of the reasons why SOX ยง404
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