By Joel Hess on February 18, 2022 at 8:00 AM
When it was time for public companies to implement the new lease accounting standard, many opted for a tool they already know: spreadsheets. Similar to the prior lease accounting standard, they figured this wouldn’t be too difficult to update regardless of how many leases they had. How hard could it be?
After more than a year since implementing ASC 842, CPA firms and their public clients are realizing just how much of a time suck it is to use spreadsheets for lease accounting, including ongoing lease maintenance.
The new lease standard is more difficult to maintain than previous standards, and as companies are seeing during the COVID-19 pandemic, lease revisions are also more complicated. While some companies have ample resources to spend hours updating spreadsheets, the accounting departments of most companies do not. And because operating leases—especially for real estate—are often a material change to the balance sheet, more senior-level individuals are involved than before. Companies cannot afford to devote so much time to an inefficient process.
Lease accounting software makes a tremendous difference in the amount of time spent on implementing and maintaining the new lease accounting standard. Keep reading to learn more about the return on investment you and your clients can see with lease accounting software.
Make ongoing maintenance a breeze
With lease accounting software, ongoing maintenance is exponentially faster than with spreadsheets. Spreadsheets are fragile and formulas are easily broken, especially when several people are working in the same document. Add to that the additional work the new lease standard brings, such as calculating annual quantitative footnote disclosures, and ongoing maintenance takes up a lot of time for public companies and their auditors—meaning it also becomes more expensive.
I spoke to one manager from a CPA firm who was surprised at just how many Day 2 challenges occur with the new lease standard. In our conversation he referenced two of his public clients, one with 1,400 real estate leases and a retailer that had 700 leases—all of which were being managed in spreadsheets. Imagine what happens when one of those formulas breaks.
Another manager at a different CPA firm said that while spreadsheets worked during implementation for public clients with only a few leases, she could already see issues with ongoing maintenance.
Lease accounting software like LeaseCrunch helps you go from spending hours on these tasks to mere minutes with the push of a button:
- Generating monthly journal entries
- Making lease revisions
- Calculating annual quantitative footnote disclosures
Implement the new lease accounting standard with ease
As long as non-public companies have an extension on implementing the new lease accounting standard, they can learn from public company experiences. CPA firms have watched their public company clients learn the hard way that implementing the new lease standard with spreadsheets is inefficient.
I spoke with one public company CFO who used spreadsheets for implementation; she lamented, “It took me weeks to build the spreadsheet.” (Now imagine the time needed to fix just a couple formula issues when the spreadsheet inevitably breaks. We’re talking circular reference issues for days!) With lease accounting software, setup is easy. Simply enter the lease information, and with one click generate journal entries, amortization schedules, and footnote disclosures.
Besides setup, LeaseCrunch also offers huge time savings during these implementation activities:
- Determining policy elections
- Documenting lease classification
- Reviewing contracts for embedded leases
- Inputting real estate and other leases
And even though the implementation has been delayed for non-public companies, it’s not too early to prepare for the new lease standard. CPA firms reported that many of their public clients used spreadsheets for implementation simply because they weren’t prepared, and hadn’t researched their options early enough. Don’t waste the opportunity this extension affords for your privately-held clients.
Discover what lease accounting software can do for you
With our Time-Savings Calculator, you can customize your numbers to see for yourself just how much time you can save with LeaseCrunch lease accounting software over spreadsheets.
Want to explore further? Request a demo so that you can see LeaseCrunch in action and start your free trial.