Blog November 12, 2020

3 drawbacks of spreadsheets in your lease accounting transition

By Chris Vroman

Private companies looking to transition to the new lease accounting standards may be in for a rough ride if they rely on spreadsheets. The deadline for compliance with FASB ASC-842 isn’t until December 2021, but considering that transition efforts shouldn’t be left until the last minute, some companies may already be looking at their spreadsheet-reliant processes with a healthy dose of skepticism.

The huge role that data has to play in the new lease accounting standards could make it difficult to manage the transition using spreadsheets. Accounting departments need to focus on the technology that supports business processes and operations to ensure a smooth transition to the new standards. Here’s why:

1) Too many collaborators

Even if the majority of your real estate data exists in spreadsheets handled by your financial department, the data you’re going to need to access for ASC-842 won’t be owned by just Finance. Data will be coming in from your Real Estate team, Procurement team, Legal team, HR, and really from anyone who plays a part in managing leases and signing new lease contracts going forward.

You’ll have a sizable list of collaborators as you look to gain compliance with the accounting standards. With multiple departments coming together to handle this data, a spreadsheet-based system that doesn’t connect to a centralized data source will be at a higher risk of human error. Data integrity is critical, especially when there are more people involved.

2) There’s A LOT of data you’ll need to handle

In addition to the participation of multiple departments, it’s impossible to overstate the sheer volume of data that will need to be handled as you transition over to new standards. Take a moment to think about all of the nuances that are included in your portfolio. Will you need to do dual reporting? Do you have any embedded leases? Do you have any foreign currency translations to do?

While you should be starting the transition with enough time to spare, the process of filling up spreadsheets with all the necessary formulas and calculations is going to put an excessive amount of stress on your operations. Even if you think you might be able to pull it off for the transition, you need to remember that the transition is just the beginning. Handling static data is one thing, but handling constantly changing data with processes that aren’t easily scalable is another.

3) Data will be in flux after transition

Getting all of your data through the transition to new lease accounting standards may be possible with spreadsheets, but when new information starts to come in, the trouble will REALLY pick up. As new leases are signed and new terms and clauses go into effect, the complex data you put into a cumbersome spreadsheet will be difficult to accurately manage. It could compromise your data integrity, which could ruin all of your reporting and even jeopardize your compliance.

Even though spreadsheets aren’t a sustainable choice for private companies transitioning to the new lease accounting standards, you still have options when it comes to leveraging technology that benefits your business and optimizing your processes as you move towards compliance. Learn more about how the right lease accounting solution can not only help you on the path to compliance, but also help you run efficiently long afterwards.

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