USING TECHNOLOGY FOR AUTOMATING LEASE ACCOUNTING · 2020-04-09 · The “Biggies” Completeness...

© 2019 LeaseAccelerator Inc.

Tackling ASC 842 Compliance

USING TECHNOLOGY FOR AUTOMATING

LEASE ACCOUNTING


Today’s Speakers

Yulia Ellison, CPA

Implementation Specialist

Vaco

Jean Caldwell, CPA

Project Manager

Vaco

Alex Klein, CPA

Solution Consultant

LeaseAccelerator


Agenda

• Successful Journey to Lease Accounting

Compliance

• Day Two Reporting: Complex Use Cases

• Leveraging Technology Automation for

Sustainable Compliance

Successful Journey to Lease

Accounting Compliance

Presented by: Jean Caldwell

6

About Vaco Where do you start?

Plan, Plan, Plan!

• Project management implementation roadmap and calendar

Select your team

• Staffing • Training • Collection and abstraction

Biggie • Completeness and accuracy • IBR

IT Systems

Project Management

The “Biggies”

Completeness and Accuracy

IBR

Obtain data from CR & AP journal

Look for recurring payments and trends

Search for missing leases in your population to confirm completeness

Quantitative lease analysis form by country – local attestation

Reconcile to ASC840 footnote disclosure in prior 10-K or annual report

Need the collateralized (secured) borrowing rate for your company if the implicit interest rate is not identified in the lease contract

Lease term – bucket for interest rate usage

Local treasury

How often to update your rates???

Embedded leases (Coffee and the Pot)

Fx

Controls/Documentation/White Papers

Key Judgements

Process narrative

Acquisitions/Divestitures

Impairments

Not the

“Biggies”

but still

complex!

Organizational Footprint

Roll ups

GL structures

Cost centers

Multiple ERPs

Organizational Footprint

How is organization structured

Regions

Countries

Locations

FX

Lease naming conventions

Think

and

Plan

What’s Next?

Line up a consultant

Vendor selection

• Journal Entries

• Accuracy

• Day 2

• Disclosures & Reporting

• Integration

Vendor Selection

11

Overcoming Complexity

Complexity #1. Judgements and Decisions

• Leverage Technology to automate judgement and decision

• Complete Lease Accounting Subledger

Complexity #2. Ongoing Lease Management

• Ensure Accuracy and Completeness of data through Robotic Process Automation

• Automated Stakeholder Communications

Complexity #3. Support is Key

• Ensure you receive full support including Testing, Ongoing Training and Support

12

Balance Sheet

• Separate lease accounting line items or combine

• Materiality considerations

• Footnote disclosure

P & L

• Variable lease component disclosure

Cash Flows

• Operating leases

• Finance leases

Other Disclosures

• Maturity analysis

• Disaggregation

• Region

• Business unit

Classification and Footnote Disclosures

13

The Result

13

• Lowest Compliance Risk Because human error is eliminated and policies and controls are automatically enforced, the risk of errors in reporting or audit documentation are minimized

• Lowest Cost of Operation By applying fully automated processes, the headcount otherwise required to perform so many required tasks is eliminated, reducing operational costs and headcount impact

• Provable ROI In addition to these cost savings, eliminating evergreen payments. Reducing lessor rates, enforcing more cost-effective lease vs. buy policies – all contribute to offset and surpass technology costs.

• Highest Success By designating dedicated implementation teams, getting 24 X 7 support from leasing experts, and ongoing training and certification, you can achieve project success now and into the future


LEVERAGING TECHNOLOGY AUTOMATION

FOR SUSTAINABLE COMPLIANCE

LEASE ACCOUNTING 2.0: THE NEXT EVOLUTION

TACKLING ASC 842 COMPLIANCE

Enterprise Lease Accounting Software

© 2019 LeaseAccelerator Inc. Presented by: Alex Klein


The New Standards Add Complexity

• New conceptual frameworks

• Intricate transactions recording

• Analytical processes

• More interpretive

• Review and remeasurement required

• Principles-based approach


Problems for Lease Accounting & Lease Management

Expert Advice & Lease Domain Expertise

No Enterprise

Systems

No Financial

Controls

No Standardized

Processes

Highly Decentralized Unfamiliar Requirements System or People?

Companies have lease portfolios

ranging from $1M to $10B+, but they have:


The Controller’s Challenge

Capturing decisions and events across the lease lifecycle:

Usage

Parameterization

Reorganization

Allocations


The Problem: Lease Accounting Compliance

Unmanaged Highly Decentralized

• Transactions

• Stakeholders

• Leases

• Assets

Massive Spend

America’s Largest

Companies have

lease obligations

ranging from a few

million dollars to

over $30B

Moving On to the Balance Sheet High Risk of Audit Failure

Processes

(SOX)

Financial

Statements

Assets

Liabilities

10-K

Footnote

The new accounting standard has changed this, forever

• No Controls

• No Systems

• No Processes

• Significant

leakage & losses


The Lease Accounting Journey

COMPLY

• Future State Design

• Data Collection & Cleansing

• Software Configuration & Testing

• Communications & Training

DEADLINE

FINISH LINE



COMPLY





DEADLINE

FINISH LINE?

“NEW” STARTING LINE

• New Leases & End of Term

• Modifications & Reassessments

• Monthly Close & Quarterly Reports

• Substantive & Process Audit Preparation SUSTAIN



COMPLY





DEADLINE

FINISH LINE?


The greatest risk and cost is here…




• Substantive & Process Audit Preparation SUSTAIN



COMPLY





DEADLINE

FINISH LINE?





• Substantive & Process Audit Preparation

• Competitive Sourcing of Financing

• Lease versus Buy Analysis

• End of Term and Evergreen Management

• KPIs & Stakeholder Scorecards OPTIMIZE

SUSTAIN

Leverage Technology

to Reduce RISK


Straight Through Processing

REAL ESTATE

ADMINISTRATION

IT ASSET

MANAGEMENT

FLEET

MANAGEMENT

CONTRACT

MANAGEMENT

PROCUREMENT

& SOURCING

GENERAL

LEDGER

ASSET MANAGEMENT

PROCUREMENT

ACCOUNTS

PAYABLE

GENERAL

LEDGER

ACCOUNTS

PAYABLE

ERP APPLICATIONS

LEASE ACCOUNTING

SUBLEDGER

Reconciliations

Integration and APIs


What Could Go Wrong?

Capturing and

maintaining

complete and

accurate lease

data can ONLY

scale through

automation.


Best Practices

AUTOMATED LEASE

CLASSIFICATION

GENERAL LEDGER &

A/P INTEGRATIONS

AUTOMATED

TRANSITION

ACCOUNTING

CONFIGURABLE

POLICIES

& CONTROLS

ASSET-LEVEL

ACCOUNTING

ENTERPRISE

LEASE

MANAGEMENT

COMPLIANCE REPORTING

LEASE

ACCOUNTING

SUB-LEDGER

IFRS 16

IAS 17

ASC 842

ASC 840

Real Estate

Embedded

Leases

Equipment

Journal Entries

Disclosures

Maturity Analysis

Operating Lease

Finance Lease

Lease vs Buy

Automated Attestations &

Notifications

Cost-Center Allocations

Modifications &

Impairments

Audit trails

Centralized Policies

Segregation of

Duties

Centralized

Policy Elections

Comparative

Reporting

DEFINING SUCCESS

PASSING FINANCIAL AUDIT

PROCESS

TRANSFORMATION

COST SAVINGS

System: Functional and

complete reporting

developed for over 8 years

Internal Controls for

Financial Reporting

Decentralized leasing

program becomes part of

monthly close

System provides visibility

and automation

Competitive capital

sourcing for equipment

Effective end-of-term

management

SAP

Oracle, Infor,

JDE

Others


Automation vs FTEs

LOW FEATURE

SOFTWARE

FULL FEATURE

SOFTWARE

Manual Tasks = More People • Timely tracking of new leases,

changes, end of term

• Interacting with stakeholders for

updates, approvals, recordation

• Reconciliation and tie-ups

• Manual allocation to cost centers,

profit centers, project codes, etc.

• Upload of journal entries to ERP

• Manual controls and supervision

Automated Tasks = More Software • ASC 842 and IFRS 16

• Asset-level lease accounting subledger

• Automated Lease classification

• Lease vs buy analysis

• Multiple parallel ledgers and charts of accounts

• Flexible GL coding for automated allocation

• Bulk data loader

• Fast integrations for GL, A/P, upstream systems

• Automated notifications and mailback

• Workflow and segregation of duties

Software

Costs

Software

Costs

Headcount

Costs Headcount

Costs

Higher Value of Ownership More Expensive. Higher Risk.

Less Expensive. Lower Risk.

Transition

Only

Enterprise

Lease Accounting


TACKLING ASC 842 COMPLIANCE

QUESTIONS & ANSWERS

Jean Caldwell, CPA

[email protected]

Yulia Ellison, CPA

[email protected]

Alex Klein, CPA

[email protected]



THANK YOU

leaseaccelerator.com

vaco.com

USING TECHNOLOGY FOR AUTOMATING LEASE ACCOUNTING · 2020-04-09 · The “Biggies” Completeness...

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