USING TECHNOLOGY FOR AUTOMATING LEASE ACCOUNTING · 2020-04-09 · The “Biggies” Completeness...
Transcript of USING TECHNOLOGY FOR AUTOMATING LEASE ACCOUNTING · 2020-04-09 · The “Biggies” Completeness...
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Page 1 © 2019 LeaseAccelerator Inc.
Tackling ASC 842 Compliance
USING TECHNOLOGY FOR AUTOMATING
LEASE ACCOUNTING
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Page 2 © 2019 LeaseAccelerator Inc.
Today’s Speakers
Yulia Ellison, CPA
Implementation Specialist
Vaco
Jean Caldwell, CPA
Project Manager
Vaco
Alex Klein, CPA
Solution Consultant
LeaseAccelerator
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Page 3 © 2019 LeaseAccelerator Inc.
Agenda
• Successful Journey to Lease Accounting
Compliance
• Day Two Reporting: Complex Use Cases
• Leveraging Technology Automation for
Sustainable Compliance
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Successful Journey to Lease
Accounting Compliance
Presented by: Jean Caldwell
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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
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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???
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Embedded leases (Coffee and the Pot)
Fx
Controls/Documentation/White Papers
Key Judgements
Process narrative
Acquisitions/Divestitures
Impairments
Not the
“Biggies”
but still
complex!
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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
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What’s Next?
Line up a consultant
Vendor selection
• Journal Entries
• Accuracy
• Day 2
• Disclosures & Reporting
• Integration
Vendor Selection
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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
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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
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The Result
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• 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
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Page 21 © 2019 LeaseAccelerator Inc.
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
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Page 22 © 2019 LeaseAccelerator Inc.
The New Standards Add Complexity
• New conceptual frameworks
• Intricate transactions recording
• Analytical processes
• More interpretive
• Review and remeasurement required
• Principles-based approach
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Page 23 © 2019 LeaseAccelerator Inc.
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:
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Page 24 © 2019 LeaseAccelerator Inc.
The Controller’s Challenge
Capturing decisions and events across the lease lifecycle:
Usage
Parameterization
Reorganization
Allocations
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Page 25 © 2019 LeaseAccelerator Inc.
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
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Page 26 © 2019 LeaseAccelerator Inc.
The Lease Accounting Journey
COMPLY
• Future State Design
• Data Collection & Cleansing
• Software Configuration & Testing
• Communications & Training
DEADLINE
FINISH LINE
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Page 27 © 2019 LeaseAccelerator Inc.
The Lease Accounting Journey
COMPLY
• Future State Design
• Data Collection & Cleansing
• Software Configuration & Testing
• Communications & Training
DEADLINE
FINISH LINE?
“NEW” STARTING LINE
• New Leases & End of Term
• Modifications & Reassessments
• Monthly Close & Quarterly Reports
• Substantive & Process Audit Preparation SUSTAIN
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Page 28 © 2019 LeaseAccelerator Inc.
The Lease Accounting Journey
COMPLY
• Future State Design
• Data Collection & Cleansing
• Software Configuration & Testing
• Communications & Training
DEADLINE
FINISH LINE?
“NEW” STARTING LINE
The greatest risk and cost is here…
• New Leases & End of Term
• Modifications & Reassessments
• Monthly Close & Quarterly Reports
• Substantive & Process Audit Preparation SUSTAIN
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Page 29 © 2019 LeaseAccelerator Inc.
The Lease Accounting Journey
COMPLY
• Future State Design
• Data Collection & Cleansing
• Software Configuration & Testing
• Communications & Training
DEADLINE
FINISH LINE?
“NEW” STARTING LINE
• New Leases & End of Term
• Modifications & Reassessments
• Monthly Close & Quarterly Reports
• 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
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Page 30 © 2019 LeaseAccelerator Inc.
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
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Page 31 © 2019 LeaseAccelerator Inc.
What Could Go Wrong?
Capturing and
maintaining
complete and
accurate lease
data can ONLY
scale through
automation.
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Page 32 © 2019 LeaseAccelerator Inc.
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
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Page 33 © 2019 LeaseAccelerator Inc.
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
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Page 34 © 2019 LeaseAccelerator Inc.
TACKLING ASC 842 COMPLIANCE
QUESTIONS & ANSWERS
Jean Caldwell, CPA
Yulia Ellison, CPA
Alex Klein, CPA
© 2019 LeaseAccelerator Inc.
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Page 35 © 2019 LeaseAccelerator Inc.
THANK YOU
leaseaccelerator.com
vaco.com