Lessons learned while preparing for new lease accounting guidelines
As we celebrate the ball drop in Times Square this New Year’s Eve, many companies will be ringing in the 2019 effective date for the new lease accounting guidelines. Happy New Year? Maybe not for everyone, but Savills Studley has been closely monitoring the changes and actively partnering with our clients to ensure they are prepared. This year has been filled with new software implementations, technology enhancements, abstraction projects and stronger forged partnerships between accounting and real estate teams.
With much of the initial hard work preparing for the new standards behind us, we thought we would take stock of the transition challenges and share some of the lessons learned.
Privately held domestic companies have another year to prepare for the rules, but we strongly encourage anyone responsible for managing their company’s commercial real estate leases to get started now. We have seen that many domestic public companies underestimated the amount of work required to prepare for the new accounting standards, and they are now under the gun to ensure timely compliance.
All companies should make sure they have sustainable processes in place to ensure the new accounting standards will continue to be met going forward with seamless communication of re-statement events for existing leases as well as any newly added or archived leases.
Here are a few suggestions to help you navigate through the process and avoid missteps:
1. Clearly assign roles and responsibilities for the ongoing maintenance and communication of updated lease information to accounting.
2. Ensure the appropriate security groups have been created and the right level of access has been assigned to each user to enforce separation of duties.
3. Execute multi-tiered quality control processes to protect data integrity.
4. Automate processes wherever possible as these events will routinely be repeated. Minor customization costs for tailored report formats may save hours of manual labor and will ensure consistency.
5. Budget for extra work: The new guidelines will require additional resources; if you have not added resources to your internal teams, it’s time to identify the right partner.
6. Document the procedures, identify the data points required for the new reporting guidelines, and prepare an abstract scope that reflects the individual(s) responsible for maintaining each data point.
Savills Studley’s expertise offers scalable support to assist with any consulting, abstraction, lease administration or database maintenance requirements.