Every rental contract needs to be put in one place, in
the same format, in full and complete detail, says Vincent
Baczor
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Much is being discussed about the planned lease accounting
rule changes, the delay, and exactly what it all means.
But little is said about the
practical implications for global businesses, what they need to do,
and how. But one thing is certain – the rules will change and
businesses will have an enormous task on their hands.
A second Exposure Draft, inviting
general comment, is due shortly from the International Accounting
Standards Board and the US Financial Accounting Standards
Board.
Therefore, lease accounting will
soon be back on the agenda and businesses will inevitably be guided
by auditors, lawyers and consultants; but who is going to pull
everything together?
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By GlobalDataPut simply, corporates need to
identify every single lease and rental contract and put them all in
one place, in the same format, in full and complete detail.
The information can then be used to
identify necessary changes during a transition period, before
meeting extensive new accounting and reporting requirements in the
near future.
We have yet to come across a large
company with comprehensive, relevant and accessible lease
information. Most businesses simply haven’t taken leasing seriously
enough when arranging, storing, or managing data.
Given that lease and rental
contracts are often for business-critical assets, it’s surprising
that so many portfolios are in disarray, contained within
inadequate spreadsheets, or managed by untrained personnel.
Gathering detailed lease
information from multiple sources is both time consuming and
frustrating, especially if those sources are spread across a number
of different locations or countries.
Typically, each business has leases
for a variety of assets, such as office equipment, machinery,
technology, vehicles, or buildings. Inevitably, the quality of the
information will be inconsistent, even within a single business,
increasing the difficulty of pulling the data together.
And the information about the
differing assets will also be structured in different ways, for
example a vehicle contract hire agreement will differ from a lease
on a building.
One further key consideration is
where the information can be stored. There are very few
designed-for-purpose systems currently available.
Archaic spreadsheets will prove
wholly inadequate and bolt-on modules to accounting software,
insufficient. There is, indeed, a great deal to think about beyond
talk and theory.
Getting on with the job is going to
come as a great surprise to most, particularly given the
considerable time implications of getting the necessary information
and detail together.
Vincent Baczor is founder and
director of lease portfolio management specialist
Innervision
