maintaining your lease accounting data...maintaining your lease accounting data – twenty events...

MAINTAINING YOUR LEASE ACCOUNTING DATA

Developed For:

www.leaseaccelerator.com

TWENTY EVENTS YOUWILL NEED TO TRACK

DAY TWO &BEYONDOPERATIONS

PART ONE:The Lease Accounting Data Challenge• Maintaining Your Leasing Data• The Start and End of a Lease• Changes throughout the Term• Operational Data• Processes to Maintain Lease Data• How to Collect the Data

PART TWO:New Leases1) New Leases2) Embedded Leases3) Sale-leaseback

PART THREE:Changes To Leases4) Invoiced Expenses5) Disbursements6) Variable Rent Schedules7) Floor Space Expansions/Contractions8) Equipment Swaps and Upgrades9) Equipment Location Changes10) Cost Center Changes11) Employee Changes12) Vendor Changes

PART FOUR:Subleases13) New Subleases14) Changes to Subleases15) Sublease Collections

PART FIVE:End Of Lease16) Changes to End of Term Plans17) Renewals of Leases18) Real Estate Terminations19) Security Deposits20) Equipment Returns21) Equipment Buyouts

PART FIVE:Summary And RecommendationsSummaryNew Leases – Data and Systems Changes to Leases – Data and Systems Subleases – Data and SystemsEnd of Term – Data and SystemsAbout LeaseAccelerator

Maintaining Your Lease Accounting Data – Twenty Events You Will Need to Track www.leaseaccelerator.com PAGE: 02

Table of Contents

THE LEASE ACCOUNTINGDATA CHALLENGE

PART ONE


Maintaining Your Leasing Data

THE THREE V’S OF LEASING DATA

The volume, velocity, and variety of leasing data changes will present an administrative challenge for many large companies.

As the deadlines for the new standards grow closer, most companies are focused on getting to Day One compliance. Project teams are busy abstracting the necessary data from lease contracts and uploading it into a lease accounting application. However, few companies have given significant consideration to how they will manage the process of keeping their lease accounting data accurate on Day Two and beyond. How will you ensure that your lease accounting system is kept current with the most accurate, complete, and up-to-date information about leases?

Your leasing portfolio is constantly changing:

CAPTURING NEW LEASES AND END OF LEASE DECISIONS


The Start and End of a Lease

NEW LEASESHow will you get visibility to the thousands of new leases being signed by various business units across the world?

EMBEDDED LEASESHow will you track contracts that lawyers and bankers do not consider leases, but accountants do?

END OF LEASE DECISIONSHow will you keep track of thousands of equipment lease end dates as well as the associated decisions to renew, return, buyout, or return the assets?

MIDTERM CHANGES TO LEASES

The changes do not just occur at the start or end of the lease. There are changes in the middle of the lease as well. Assets can come on or off lease schedules. Variable rents might change. Have you considered:

SUBLEASES:How will you get visibility into new subleases being signed for properties around the world?

REAL ESTATE FLOOR SPACE:How will you track changes to real estate leases as local offices decide to expand and contract floor space?

UPGRADES AND SWAPS:How will you get visibility into mid term changes to equipment such as swaps for component failures or upgrades for capacity requirements?

PARTIAL BUYOUTS AND RETURNS:How will you track equipment that is lost, stolen, or damaged resulting in an early buyout or return?

VARIABLE RENT:How will you track updates to performance, usage, and index-based rents that change on a periodic basis?


Changes throughout the Term

Some changes to data are more operational in nature, such as changes to:

These impact not only the accuracy of financial reporting, but also property taxes and insurance.

Of course, keeping data such as location and cost center accurate for each lease depends on knowing who to ask for the information:

LOCATIONSHow will you keep track of tens of thousands of pieces of leased equipment (computers, vehicles, forklifts, rail cars) moving around the world?

EMPLOYEESYou will need to know who is the “owner” of the leased asset within your organization. These may be individuals within the operations, logistics, real estate, or corporate IT organizations.

COST CENTERSHow will you track the relationships between cost centers and ROU assets as you go through reorganizations, mergers, acquisitions, and divestitures?

VENDORSIn some cases the owner

may not be an employee at all. If you have outsourced

property management, transportation, or IT to a

third party, it may be a service provider or

outsourcing firm.

LOCATIONS, COST CENTERS, AND EMPLOYEES


Operational Data

To ensure that your lease accounting system is kept up-to-date, you will need to establish business processes to capture changes that occur throughout the lifecycle. In this guide, we will discuss twenty scenarios in which you will have to capture information about leases necessary to perform the proper accounting.

When evaluating what information to collect, you should consider not only the minimal set of data required to perform the accounting calculations, but also what supporting documentation might be required to satisfy a financial or SOX audit. Best practice is to capture all the financial data related to leases that would be necessary for:

For each of these scenarios you will need to decide:1 What information needs to be collected to perform the proper lease accounting2 What approach is best to collect the information

from the appropriate sources

BUSINESS PROCESSES


Processes to Maintain Lease Data

• Budgeting, forecasting, and planning future lease expenses• Complying with tax, insurance, and regulatory obligations

• Analyzing business unit level profit & loss models• Procurement-driven category spend analysis

When evaluating what approach is best to collect the information, consider the risks, costs, and benefits of various levels of automation. Some scenarios, particularly those with a high volume or velocity of changes, are ideal for automating. Think bulk uploading 10,000 journal entries into your general ledger for monthly close.

THE RIGHT LEVEL OF AUTOMATION


How to Collect the Data

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For each of the twenty scenarios below we will outline some of the key information to be collected and the typical approach to collecting it.

Other scenarios, such as those that require judgments or analysis to extract the appropriate data required for accounting, are ideal for manual input. Think embedded leases contained in complex contract manufacturing agreements.

NEW LEASESPART TWO

TWENTYEVENTS YOU WILLNEED TO TRACK

When a new lease is established, the details should be captured and uploaded into your lease accounting application. Details such as the lessor, commencement date, payment frequency, contract length, and base and variable rents will be needed to perform the accounting. You will also need specifics about the asset(s) listed on the lease schedule. Think property addresses for real estate or serial numbers for equipment. In addition to the key data needed to perform the accounting, you should also capture the supporting documentation, such as the Master Lease Agreement and schedules. Best practice is to capture the results of any lease versus buy analysis that may have been performed as well as any details about the procurement and competitive bidding process. These supporting documents will be important for financial and SOX audits.

Much of the data needed for the accounting could be abstracted from the Master Lease Agreement and schedules. However, the abstraction process can be time consuming and error prone if it is performed manually. A better option is configure an automated flow of data from your internal systems. Procurement and contract management systems will capture some of the high level details related to leases. Depending on the type of lease, additional details may be captured from a real estate administration application, IT asset management system, or fleet management system. Another option is to go directly to the leasing company itself to get the original lease documents and data.


01New Leases

WHAT TO COLLECT

HOW TO COLLECT IT

When a new embedded lease is established, the details should be captured and uploaded into your lease accounting application. Based on the revised definitions of a lease introduced in ASC 842 and IFRS 16, your organization may have leases embedded in contract manufacturing agreements, IT outsourcing arrangements, and business process outsourcing deals. The same information captured for a traditional lease will be needed, including the lessor, commencement date, payment frequency, contract length, and base and variable rents. However, for embedded leases you may want to also document the analysis that was used to assess if the contract met the definition of a lease. For example, you may want to capture your notes, calculations and judgments about whether the asset could be identified, who has the rights to the economics and who has the right to direct how the asset is used.

Most contracts with assets qualifying embedded leases are not written in such a way that the traditional leasing terms can be easily extracted. Lease and non-lease components will need to be separated. Information such as the initial direct costs, end of term options, and base and variable rents will need to be calculated based on interpretations of the new standards, corporate accounting policies, and contract-specific judgments. Therefore, having a contract analyst review the documents associated with each set of leases may be the best approach to arrive at the appropriate inputs for the accounting process.


02Embedded Leases

WHAT TO COLLECT

HOW TO COLLECT IT

When a sale-leaseback transaction occurs, the details of the sale will need to be loaded into your revenue recognition system while the details of the lease will need to be recorded in your lease accounting application. For lease accounting, you will need to capture all of the information that would be collected for a typical lease. Details such as the commencement date, contract length, payment frequency, and base and variable rents will be needed to perform the accounting. End of term options to renew, purchase, and terminate the lease will be important, as will any residual value guarantees.

For sale-leaseback arrangements you should also document the analysis that was performed. The new standards require an assessment as to whether a true sale has occurred.

At most companies, there will be a relatively small number of sale-leaseback transactions. And the accounting for sale-leaseback transactions requires a broader set of considerations than a typical lease. Therefore, having a contract analyst review the documents associated with each individual transaction to abstract the appropriate data may be the best approach. Much of the data needed for the accounting could be abstracted from the Master Lease Agreement and schedules. To ensure accuracy, the data should be compared to the information in the procurement, contract management, real estate, and revenue accounting applications.


03Sale-leaseback

WHAT TO COLLECT

HOW TO COLLECT IT


CHANGES TO LEASESPART THREE

For each invoice received from a lessor, you will need to capture the details in order to generate the appropriate variable lease expenses or operating expense accruals. Details to capture should include the lessor name, invoice amount, invoice number, and invoice data. Many of the invoice details should match the amounts defined in the original contract. However, in some cases, there may be invoiced expenses that were not part of the expected payment schedule. For example, some equipment leases price monthly rent based on utilization or consumption. Think photocopiers being billed by the page. And some real estate leases include charges for monthly operating expenses. Think Common Area Maintenance (CAMs) charges for utilities and building services.

WHAT TO COLLECT

Your accounts payable system is the best source for identifying actual invoiced expenses. However, most large organizations have multiple AP applications being operated by multiple payment factories around the world. Additionally, your company may have outsourced accounts payable to a third party business process outsourcing organization. Therefore, you may have to interface with multiple groups or systems to ensure that you capture all of the necessary invoice data.


04Invoiced Expenses

WHAT TO COLLECT

HOW TO COLLECT IT

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As payments are made to lessors, you will want to publish the details of the actual disbursement in your lease accounting system. Payment disbursement details such as payment amount, payment date, payee, and invoice number are required for a number of reasons. First, the actual disbursements will need to be shared to perform clearing of the expected payment in the sub ledger. Second, the actual disbursements should be reconciled against the actual invoiced expenses and predicted invoice expenses for each lease. Third, payment details are useful to have on file when lessors call with inquiries about remittance advices and actual payments.

Your accounts payable system is the best source for capturing disbursement information. As discussed earlier, most companies have multiple payment factories that are operated in-house or by a third party. Therefore, you may have to interface with multiple systems to capture all of the necessary payment data.


05Disbursements

WHAT TO COLLECT

HOW TO COLLECT IT

Many leases have planned changes to the rent at selected milestones based on performance, usage, or economic factors. For example, many real estate leases have variable rents that are based on last year’s sales performance or a market index such as the Consumer Price Index (CPI). Some equipment leases have planned escalations and rent changes that occur during the term of the lease. When changes to rent schedules occur, the lease accounting system will need to be updated with the reason for the rate change, the effective date, and the new payment amount.

Changes to variable rents should be recorded in the real estate administration system for property leases. Most companies do not have a system of record for tracking changes to equipment lease rents. However, the data does not necessarily need to be tracked in another system as most companies will have a relatively low volume of rent changes. In most circumstances, these variable rent changes can simply be keyed directly into the lease accounting application.


06Variable Rent Schedules

WHAT TO COLLECT

HOW TO COLLECT IT

Many long term real estate leases offer options to expand or contract the amount of floor space being leased. If these options are elected at a leased property, then there may be a need to reassess and modify the accounting. When an expansion or a contraction of a property lease occurs, both the original amount of floor space leased and the new amount of floor space leased will need to be captured. Additional information such as the effective date of change, new payment amount, and new lease term will also need to be shared.

Expansions and contractions of floor space should be recorded in the real estate administration systems. However, at most companies, these types of changes will be infrequent. Investments in an automated process will probably not be justified. These changes can simply be keyed into the lease accounting application directly.


07Floor Space Expansions/Contractions

WHAT TO COLLECT

HOW TO COLLECT IT

Equipment leases can experience a variety of changes during their lifecycle. Assets (or components of assets) might be swapped out or upgraded during the term of a lease. Swaps often result from an equipment failure, maintenance, or a repair activity. For example, one defective laptop is swapped out for a new one with the same (or similar) specifications. You also may want to upgrade the capacity, performance, or technology for an asset during the term of a lease in order to respond to changing business needs. Certain types of swaps and upgrades may require a reassessment of your lease accounting. Even if there is no accounting impact, it is good practice to capture the updated equipment description, model number, and serial number when a swap or upgrade occurs.

The details of these change events are typically captured in your IT asset management system, fleet management system, or other enterprise application. At most companies, the volume of swaps and upgrades will be relatively low. Investments in an automated process to keep the equipment asset records up-to-date in your lease accounting system will likely not be justified. Instead, the swaps and upgrades can simply be keyed directly into the lease accounting application.


08Equipment Swaps and Upgrades

WHAT TO COLLECT

HOW TO COLLECT IT

Leased equipment may be moved to various locations within your enterprise during the term of a lease. A change to physical location may not have an immediate impact on the accounting for the lease. However, there may be an impact on the amount of property tax owed for the asset or the insurance coverage required for the equipment. Furthermore, equipment that cannot be located may have been lost or stolen. Identifying these scenarios quickly will enable you to minimize the amount of rent being paid for assets that are no longer being used. Typically, you will need to negotiate a mid-term buyout for lost or stolen assets, which will require an update to your lease accounting.

Your company may or may not have a process for tracking the location of leased equipment assets. Even if the changes are tracked in a system, best practice is to periodically verify the location of all leased equipment assets with the departments using the assets. An automated process that emails asset users once per year is a popular approach.


09Equipment Location Changes

WHAT TO COLLECT

HOW TO COLLECT IT

The cost centers associated with leased real estate and equipment may change during the term of a lease. There could be numerous reasons for the change. Office space may need to be consolidated following a merger. Equipment assets might be reassigned to new cost centers following a corporate reorganization or strategy change. Regardless of the underlying cause of change, the updated cost center assignments will need to be updated in the lease accounting system along with the effective dates. The relationship could be particularly important for companies that provide segment reporting by business unit or geography in public financial disclosures. Ideally, cost centers should be tracked at the asset level. Different pieces of equipment on the same lease schedule might be assigned to two different cost centers, and there are examples of a single right of use asset being split across multiple cost centers.

Your company may have a process to review which assets are assigned to which cost centers following a change in the structure. At most companies, cost center errors will not be identified until the budget holder identifies that expenses are being incorrectly billed to a department. Ideally, the process would be more proactive. Best practice is to periodically verify that the cost centers associated with each leased asset are correct. An automated process that emails asset users once per year is a popular approach.


10Cost Center Changes

WHAT TO COLLECT

HOW TO COLLECT IT

The cost centers associated with leased real estate and equipment may change during the term of a lease. There could be numerous reasons for the change. Office space may need to be consolidated following a merger. Equipment assets might be reassigned to new cost centers following a corporate reorganization or strategy change. Regardless of the underlying cause of change, the updated cost center assignments will need to be updated in the lease accounting system along with the effective dates. The relationship could be particularly important for companies that provide segment reporting by business unit or geography in public financial disclosures. Ideally, cost centers should be tracked at the asset level. Different pieces of equipment on the same lease schedule might be assigned to two different cost centers, and there are examples of a single right of use asset being split across multiple cost centers.

Your company may have a process to review which assets are assigned to which cost centers following a change in the structure. At most companies, cost center errors will not be identified until the budget holder identifies that expenses are being incorrectly billed to a department. Ideally, the process would be more proactive. Best practice is to periodically verify that the cost centers associated with each leased asset are correct. An automated process that emails asset users once per year is a popular approach.


11Employee Changes

WHAT TO COLLECT

HOW TO COLLECT IT

Some of the assets you lease may be managed on a day-to-day basis by outside vendors. You may have hired an external property management or commercial real estate firm to manage your various office locations. You may have outsourced your data center operations or end-user IT support to a third party organization. Contracts qualifying as embedded leases are likely to be managed by outside vendors. You may have embedded leases for production equipment or factories that are operated by contract manufacturers. You may have embedded leases for material handling equipment or warehouses that are operated by 3rd party logistics providers.

The vendors that provide these outsourced services may change during the term of a lease. A new vendor might be selected that offers lower pricing or better customer service. Regardless of the underlying cause, the new vendor assignment should be tracked in your lease accounting application. As auditors have questions about current leases or as you need to perform periodic attestations of leasing data, you will need to know the specific employee at the external vendor associated with each lease. The employee assigned at the vendor may change frequently as key resources are moved between different accounts.

Tracking the employee to leased asset relationship at external vendors is one of the more challenging data elements needed for lease accounting. You will need to track if the vendor managing certain leased assets changes and if the employees assigned changes. A periodic attestation process is a popular approach. Successful tracking will require that you define a hierarchy of relationships that includes several points of contact at the outside vendor. If the primary employee assigned to a leased asset does not respond, then others can be asked for the new point of contact.


12Vendor Changes

WHAT TO COLLECT

HOW TO COLLECT IT


SUBLEASESPART FOUR

If you decide to sublease part or all of a building to a sub tenant, then you have effectively become a lessor for accounting purposes. For each sublease, the details of the contract will need to be uploaded into the lease accounting application. Schedule level information will be needed to perform the proper policy elections, judgments, and calculations. Examples of data might include the sub-tenant (lessee), property address, floor number, commencement date, payment frequency, contract length, base/variable rent, and end of lease options.

Most companies track subleases in their real estate lease administration application. If your company has outsourced to a property management or commercial real estate firm, then you may need to interface with these organizations to gain visibility into subleases. At most companies, the volume of subleases will be relatively low. Therefore, an automated approach will likely not be justified. Instead, the sublease details can be keyed directly into your lease accounting application.


13New Subleases

WHAT TO COLLECT

HOW TO COLLECT IT

Just as you might expand or contract your own real estate leases for the properties you occupy, your sub tenants may require changes to their subleases as well. Specifically, during the term of a sublease there may be expansions, contractions, renewals or terminations. The sublease changes will need to be captured in the lease accounting application as well. For example, to perform the proper financial reporting, the sub tenant name and effective dates of these changes will need to be captured. Additional data might include the corresponding changes to payment frequency, contract length, base/variable rent, and end of lease options.

Most companies track subleases in their real estate administration application. If your company has outsourced to a property management or commercial real estate firm, then you may need to interface with these organizations to gain visibility into sublease changes. Just as with new subleases, changes to existing agreements will be relatively infrequent. Therefore, investing in automation to keep your lease accounting system current may be unnecessary.


14Changes to Subleases

WHAT TO COLLECT

HOW TO COLLECT IT

Details from the invoices sent to sub tenants each month and the payments collected from each will be needed to perform your lease accounting. With each billing cycle, you will need to capture the sub tenant (lessee) name, amount paid, date of receipt, and invoice number. Additionally, you may need to capture details for non-lease components that are bundled into the sub tenant invoices such as property insurance, local taxes, or operating expenses (e.g. CAMs charges).

Sublease collections are typically recorded in your accounts receivable application. Most larger companies have multiple shared service centers performing collections activities using multiple systems. Additionally, it has become increasingly common to outsource collections to a third party. Therefore, you may have to interface with several different organizations and systems to obtain the sublease collection data needed for your lease accounting.


15Sublease Collections

WHAT TO COLLECT

HOW TO COLLECT IT


END OF LEASEPART FIVE

The initial measurement of a lease under the new standards requires accountants to make judgments about the “reasonably certain” plans for the assets at end of term. Leases which are expected to be renewed will be accounted for differently than those which are expected to be terminated. If the long-term plans for a specific asset change during the term of a lease, there may be a need to reassess and modify the lease accounting.

Some companies might capture changes to end of term plans in an asset management system or real estate administration application. These changes to plans should be updated in your lease accounting system as well. If you outsource real estate, fleet, IT, or other operational functions, you may need to interface with external organizations to keep track of end of term plans as well.


16Changes to End of Term Plans

WHAT TO COLLECT

HOW TO COLLECT IT

When a real estate lease is renewed, the rents may change along with other contractual terms. For each renewal, details such as the landlord/lessor, renewal term, commencement date, payment frequency, contract length, end of term options, and base and variable rent payments should be captured. Equipment leases present a unique set of challenges as it is common for some assets to be renewed while others are returned or purchased. To perform the complex, asset-level lease accounting required for these partial renewal scenarios you will need to identify the specific assets being renewed via the serial number, product description, lessor, and/or manufacturer.

Lease renewals may be captured in a number of different systems across your business. A purchase order should be generated in the procurement system. New legal documents should be uploaded to the contract management system. Renewals of property leases should be captured in the real estate administration system. Extensions of IT, fleet, or other equipment leases should be recorded in the appropriate asset management application. Therefore, the best approach to collecting the data needed for renewals may vary from company to company. An additional option is to go directly to the leasing company for a copy of the renewal agreements.


17 Renewals of Leases

WHAT TO COLLECT

HOW TO COLLECT IT

You may discontinue real estate leases in scenarios where you are upgrading, expanding, or consolidating office space. Or you may have business situations where you are exiting a facility in a geographic region that no longer requires local operations. Performing proper lease accounting will require you to track any terminations to real estate leases whether those occur at the end of term or earlier. Details such as the property address, effective date, and any known end of lease fees should be recorded in order to perform the proper accounting.

Terminations to property leases should be captured in your real estate administration system. However, some companies are not timely when performing a recordation of the details. Best practice is to automate the workflows associated with end of lease decisions to ensure that all parties are aware of decisions to terminate a lease. If you outsource facilities management to a third party property manager or commercial real estate firm, then you might need to interface with that organization to capture the necessary details about lease terminations.


18Real Estate Terminations

WHAT TO COLLECT

HOW TO COLLECT IT

At the end of the lease, security deposits or other funds might be collected from the lessor upon the fulfillment of contractual obligations. These funds are often received by check, deposited, and booked as a non-trade receivable. To perform the proper lease accounting you will need to collect the details such as the landlord name, property address, amount received, and collection date for upload.

Security deposits should be recorded in your accounts receivable system. Larger companies may have multiple shared service centers processing receivables in multiple different AR applications. Additionally, some companies have outsourced collections to third party business process outsourcing firms. Therefore, you may have to interface with multiple organizations and systems to track security deposit refunds collected.


19Security Deposits

WHAT TO COLLECT

HOW TO COLLECT IT

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When an equipment lease is terminated and the equipment is returned, the appropriate recordation should occur in the lease accounting system. It is common for some assets on an equipment lease to be returned while others are renewed or purchased. Therefore, the specific equipment assets to be returned should be uniquely identified via serial number, product description, lessor, and/or manufacturer. For each returned asset, details such as the effective date, return fees, and Return Merchandise Authorization (RMA) should be captured.

Equipment returns should be recorded in the appropriate asset management system. However, many companies are not well disciplined about performing a timely recordation of the details. Best practice is to automate the workflows associated with equipment returns to ensure that key milestones are visible to all parties involved. Best-in-class enterprise lease management systems will have specialized workflows for equipment returns. One step in the workflow should be to publish the appropriate details about the asset returns to the organization or lease accounting system.


20Equipment Returns

WHAT TO COLLECT

HOW TO COLLECT IT

When equipment assets are purchased at the end of term, the records in your lease accounting system will need to be updated. Equipment buyouts can be challenging as the lease schedules often contain more than one asset. It is common for some assets on a lease to be purchased while others are renewed or returned. Therefore, the specific equipment assets to be returned should be uniquely identified via serial number, product description, lessor, and/or manufacturer. For each purchased asset, the details such as the purchase price and effective date should be captured.

Equipment buyouts should be recorded in several financial systems across your business. A buyout purchase order should be issued by the procurement application. The legal documents conveying the transfer of ownership should be uploaded into the contract management system. Lastly, the fixed asset management system will need to be updated to reflect the change in ownership. Depending on the type of equipment being purchased, records in the IT asset management system, fleet management system, or other enterprise application may need to be updated as well. Therefore, the best approach to collecting the data needed for buyouts may vary from company to company. An additional option is to go directly to the leasing company for a copy of the buyout agreement.


21Equipment Buyouts

WHAT TO COLLECT

HOW TO COLLECT IT


SUMMARY AND RECOMMENDATIONSPART FIVE

Most companies are investing the majority of their project efforts on achieving Day One compliance, preparing the financial reporting information needed for effective dates of the new standards. However, a secondary, parallel effort is required to define the business processes required for compliance with the new standards on Day Two and beyond. Maintaining accurate lease accounting will require establishing processes to track new leases and changes to existing leases. At most companies, leasing processes, controls, and systems are relatively immature compared to other functions such as order-to-cash and procure-to-pay. As a result, a more transformational business process re-engineering effort may be required to reach a sustainable, low-cost model for on-going tracking and accounting of leases.

As discussed in this guide, there are over twenty scenarios that you should evaluate. Some of these scenarios occur at the start of the lease, such as new lease commencement, new embedded leases, and sale-leaseback transactions. Some occur during the middle of the lease, such as collecting information about invoicing and payments, real estate expansions and contractions, and equipment swaps and upgrades. Some occur at the end of lease, such as decisions regarding renewals, terminations, and buyouts. You will need processes to update your lease accounting application when rent schedules, cost centers, physical locations, employee owners, and outside vendors associated with right of use assets change. If you sublease, you will need processes to capture data when new sub-leases are issued as well as to track the associated rent collections, mid term changes, and end of term decisions.

MAINTAINING LEASING DATA ON DAY TWO AND BEYOND


Summary

New Leases

BUSINESS PROCESS DATA (WHAT TO COLLECT) SYSTEMS (WHERE TO FIND IT)

LessorCommencement datePayment frequencyContract lengthBase and variable rentsProperty address or serial numberEnd of term options

LessorCommencement datePayment frequencyContract lengthBase and variable rentsProperty address or serial numberEnd of term options

ProcurementContract managementReal estate administrationIT asset managementFleet managementOther asset management

Contract managementLessorCommencement datePayment frequencyContract lengthBase and variable rentsProperty address or serial numberEnd of term options

ProcurementContract managementReal estate administrationRevenue accounting

Embedded Leases

Sale-leaseback


New Leases – Data and Systems

Invoiced Expenses


Lessor nameInvoice amountInvoice numberInvoice line items

Reason for rate changeEffective dateNew payment amount

Accounts payable

Accounts payableLessorPayment amountPayment datePayeeInvoice number

Real estate administrationLessor

Disbursements

Variable Rent Schedule

Property address (real estate)Serial number (equipment)Leased asset userLeased asset ownerDepartment head

May not be tracked in asystem - Ask the end users

Floor SpaceExpansions orContractions


Changes to Leases – Data and Systems

Equipment Swaps andUpgrades


New equipment descriptionModel numberSerial numberDate of swap or upgrade

Property address (real estate)Serial number (equipment)New cost centerAllocations (if split)

IT asset managementOther enterprise assetmanagement


New physical locationAsset serial number


Equipment Swaps andUpgrades

Cost CenterChanges

Property address (real estate)Serial number (equipment)Leased asset userLeased asset ownerDepartment head


User or Owner Changes

Property address (real estate)Serial number (equipment)Vendor nameVendor point of contact (multiple)


VendorChanges


Changes to Leases – Data and Systems

New Sublease


Sub tenant (lessee)Property addressFloor numberCommencement datePayment frequencyBase/variable rent

Sub tenant (lessee) nameAmount paidDate of receiptInvoice numberProperty insuranceLocal taxesOperating expenses (CAMs charges)

Real estate administration

Real estate administrationPayment frequencyContract lengthBase/variable rentEnd of lease options

Accounts receivable

Changes to Subleases

Sublease Collections


Subleases – Data and Systems

Changes to End of Term Plans


Updated reasonably certain plansabout:RenewalsTerminations Purchases

May not be tracked in a system

ProcurementContract managementReal estate administrationIT asset managementFleet managementOther asset management

LessorRenewal termCommencement datePayment frequencyContract lengthBase/variable rentsEnd of term options

Real estate administrationProperty addressEffective dateEnd of term fees

Renewals of Leases

Real Estate Terminations


End of Term – Data and Systems

Security Deposits


Landlord nameProperty addressAmount receivedCollection date

Serial numberProduct descriptionLessorManufacturerEffective dateReturn feesReturn Merchandise Authorization

Serial numberProduct descriptionLessorManufacturerPurchase priceEffective date

Accounts receivable

Various asset managementsystems

ProcurementContract managementIT asset managementFleet managementOther enterprise assetmanagement

Equipment Returns

Equipment Buyouts


End of Term – Data and Systems

LeaseAccelerator offers an Enterprise Lease Accounting application that allows you to create the financial reporting required for financial disclosures under the new US GAAP and IFRS standards. Additionally, LeaseAccelerator provides an Enterprise Lease Management application that provides a sustainable, scalable approach to automating your leasing business processes on a long-term basis. Functions such as the notification and recordation of end of term renewals, buyouts and returns can be automated. Periodic attestation processes can be established to verify the accuracy of cost center, physical location, employee assigned, vendor assigned and end of term disposition. Interfaces can be established with the fixed asset management, fleet management, real estate administration, IT asset management, procurement and contract management systems to ensure that the details of new leases are captured automatically. Connections to accounts payable systems enable automated exchange of invoicing and payment data. All data and documentation associated with a lease is stored in a single, centralized repository. As a result, a complete deal history is accessible with a few mouse clicks to an internal or external auditor.

LeaseAccelerator offers the market-leading SaaS solution for Enterprise Lease Accounting, enabling compliance with the current and new FASB and IFRS standards. Using LeaseAccelerator’s proprietary Global Lease Accounting Engine, customers can apply the new standards to all categories of leases including real estate, fleet, IT, and other equipment at an asset-level. On average, LeaseAccelerator’s Lease Sourcing and Management applications generate savings of 17 percent on equipment leasing costs with smarter procurement and end-of-term management. Learn more at https://www.leaseaccelerator.com/.

LEASE DATA MANAGEMENT

ABOUT LEASEACCELERATOR


About LeaseAccelerator

www.leaseaccelerator.com

maintaining your lease accounting data...maintaining your lease accounting data – twenty events...

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