STRATEGY POLICY INVENTORY DATA
SYSTEM PROCESS
CONTROL SUSTAIN
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ROAD TO LEASE COMPLIANCE
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CONTROL
In light of the new lease accounting standards, leases play a more significant
role in your financial disclosure, which means there is increased risk around
the accounting of those leases. You now need to take a holistic view of the full
lifecycle for all your leases and refine the controls and other processes related to
identifying, calculating and accounting for them.
Numerous aspects of the new standards are causing concern among corporate
executives, but it's safe to say the control issue is top of the list for many. In a
KPMG survey in November 2017, 500 finance executives were asked what was
keeping them up at night, and internal controls over financial reporting topped
the list at 30 percent, compared to 21 percent in 2016. And the impending
changes to the new lease accounting standards are one of the underlying
causes of that increase.
What are the key areas of control consideration under the new standard?
Internal Control
An internal control – as defined by accountants and auditors – is a process
to ensure the achievement of an organization's objectives in operational
effectiveness and efficiency, reliable financial reporting, and compliance with
laws, regulations and policies. Internal control involves everything that controls
risks to an organization.
Lease Negotiation & Accounting
Historically your company may have been negotiating leases and accounting
for them on a decentralized basis, but it may be worth reviewing. While it made
sense for you to control and monitor operating leases at the business unit or
functional level when they were classified and treated as an expense along the
lines of service agreements, now that these leases are moving onto the balance
sheet, centralizing these functions may ensure better controls.
CONTROL
