Lease accounting got harder, now it’s getting easier

By - July 26, 2023

Should you rent or buy the assets your business relies on? There are pros and cons to both options. But in today’s fast-changing and often-disruptive business climate, the option to lease assets looks more appealing than ever.

With leasing, you have the potential to save costs, upgrade assets more often, and gain flexibility. It fits well with the imperative happening in many industries to become lean, agile, and innovative. Leased assets certainly give you advantages and dynamic opportunities that owned assets do not. Just be prepared for the accounting challenges that result.

Lease accounting has always been a time and detail-intensive effort that grows larger the more assets are under lease. But it recently got worse.

New requirements under ASC 842 and IFRS 16

Two new accounting rules – ASC 842 and IFRS 16 – set stricter standards for lease accounting, requiring companies to expand their record-keeping and reporting efforts substantially. Much has been written about these rules (Additional Information provided by RSM), and the full details are important to understand, but the biggest change made by these rules is this: companies must now report right-of-use (ROU) assets and liabilities on the balance sheet for every lease longer than 12 months.

For many companies, meeting these new requirements with the systems and software currently in place means managing lease agreements in one place and lease accounting in another. Someone has to manually move the information from one system to another, which is a time-consuming process ripe for errors. If that person doesn’t keep up or the information isn’t accurate, however, it could result in violations to debt covenants that put your finances in jeopardy.

Faced with an obligation that many companies are ill-equipped for, it’s time to look for solutions that make lease accounting simple, scalable, and consistently compliant.

Sage Intacct for Lease Accounting

Sage Intacct is a cloud-based financial management platform offering the sort of sophisticated (yet accessible) accounting tools you can’t get from other ERP solutions like QuickBooks.Free quarterly updates add new features and fixes, including changes specifically designed to help users comply with evolving accounting rules.

The arrival of ASC 842 and IFRS 16 prompted Sage Intacct to develop new lease accounting capabilities and strengthen some others already in the system. The result is a comprehensive toolkit for lease accounting that expedites the work required and improves the output, elevating it from an obligation to comply with to an asset that can be leveraged strategically. With this as with so many aspects of financial management, Sage Intacct lets you use accounting to your advantage.

Here’s a breakdown of how Sage Intacct handles lease accounting:

  • Sage Intacct Lease Accounting – After entering lease details into this module, it will automatically handle all monthly postings, including entries, schedules, and payments. Changing the lease terms will automatically update the related calculations and schedules. And since this module works seamlessly with core financials and key features in Sage Intacct, you can manage leases in any quantity as part of a cohesive financial management strategy.
  • Sage Intacct Real Estate – This module was built for lessors (compared to Lease Accounting for lessees). It essentially does the inverse of the other module, automating most of the calculations and record-keeping required when you lease assets to others. The Real Estate module once again works in sync with everything else in Sage Intacct so that all aspects of accounting and all financial data serve a coordinated, consistent, and comprehensive effort.

RSM and Lease Accounting

Whether you’re a lessor, and lessee, or both, Sage Intacct provides everything you need to comply with new accounting rules – and do so with ease.

The new lease accounting functionality now in Sage Intacct is a great solution for clients wanting everything within Intacct.  If clients need a more robust system for example dealing with foreign currency or roll-forward reports RSM can offer assistance with implementing a program like Lease Query.  Find your solution for lease accounting by contacting RSM.


Receive Posts by Email

Subscribe and receive notifications of new posts by email.