The new lease accounting standards IFRS 16 and ASC 842 involve critical calculations and complex functions. It applies a significant change in the way leases are accounted for in the balance sheet.
Accounting and finance professionals of several companies who have implemented new lease accounting standards in the first year have realized that spreadsheets are not effective. It is difficult to use spreadsheets for long-term lease maintenance. To comply with the new standards and financial reporting requirements, it is imperative for businesses to use advanced lease management software.
Also, with constantly evolving technology innovations and trends, businesses should embrace solutions like lease accounting software which makes the process easy, secure, and productive. Spreadsheets, on the other hand, are error-prone and increases the risk of business loss.
Some of the downfalls of using the spreadsheet for lease accounting are discussed below:
Data Collection and Data Integrity
To comply with new standards, extensive data collection, and appropriate lease modification, revisions, and impairments need to be done. The disclosure requirements have expanded under new standards as well. It is a complex and tedious task to undertake the lease accounting process, especially as per the new rules under IFRS 16 on a spreadsheet.
Therefore, data needs to available in a single repository so that all calculations, disclosures, and accounting can be done. This is possible through lease accounting software.
Additionally, in spreadsheets, there is no mechanism to protect the integrity of the data. As the data increases and thousands of cells are used, spreadsheet becomes vulnerable to accidental human errors. Moreover, small mistakes such as misplacing a decimal point or wrong formula can prove to be costly in the accounting process.
Loss of Time
Different team members from different departments like IT, finance, real estate would need access to the spreadsheet to do their job effectively. This makes it complex and difficult to use spreadsheet. Also, a lot of time is wasted in the process and the chances of human errors increases.
Furthermore, if and when an error is found, it becomes a herculean task to discover them in the spreadsheet.
The risk of losing the data is also a concern when spreadsheets are used. This can be caused by computer crashes, viruses, users with malicious intent, and other factors beyond control. Switching to lease accounting software can keep your data safe.
If your business use spreadsheets, future audits will be difficult. Additionally, it will increase cost due to the extra load of work related to lease accounting. Also, validating the accuracy of the lease information is essential. Since spreadsheets have minimal validation or security features, it can cause major problems. A single error in calculations means you will have to rework.
A lease accounting software gives you detailed information and insights about modifications or changes made.
Reports for the internal and external team are difficult to make in spreadsheets. There are certain nuances related to new lease accounting standards that can not be accommodated in a spreadsheet. High quality and customized reporting options are essential.
Financial statements with proper summary and information, journal entries, amortization schedules, footnotes are essential and they are possible with lease accounting software.
Yardi Corom Lease Accounting Software helps businesses to comply with the new standards and get IFRS 16 and ASC 842 calculations done easily. It maintains data integrity and offers customized reporting options too. To know complete features, visit www.yardicorom.com.