Are You Prepared with Lease Abstraction to Comply with ASC 842 in January 2025?

Introduction: Why ASC 842 and Lease Abstraction Matter

Lease accounting standards are reshaping how businesses record leases, making accurate, timely lease abstraction more critical than ever. ASC 842 requires detailed lease data to be reported on the balance sheet, and the process of extracting and organizing this information can be a significant operational challenge, especially for companies managing large, complex portfolios.

Private companies are fast approaching the deadline of January 2022 for implementing the process to comply with the new lease accounting standard ACS 842. The intention behind this standard is to bring every operating expense on to the balance sheet that were previously off balance sheet. 

What this essentially means is filling in all the important and critical and necessary lease data on to the accounting system to ensure compliance. It requires abstracting leases and populating required fields accurately and timely. Also, this is not a one-time effort so, companies need to have a process in place to ensure lease abstraction on an ongoing basis. 

Understanding the effort involved 

For starters lease abstraction is a complex and a tedious method. With in-house resources already stretched thin in almost every organization, managing large volumes of leases, within the stipulated timeline pose significant challenge. Typically, real estate leases are lengthy with several addendums and complicated terminologies and clauses. Some of these include rent concessions, special obligations, CAM charges, tenant allowances, and such. Sifting through 100s and 1000s of leases and extracting the right information demands proficiency and attention to details. It requires establishing a process, allocating skilled and dedicated resources, and using right tools. 

The process of lease abstraction should include a thorough quality assurance as well for every abstract to undergo a review process. This is crucial as you can imagine any wrong, inaccurate, or missed information on the lease accounting system can result in serious accounting errors which could lead to significant risk and may be difficult to rectify at a later time. To meet such demanding requirements most organizations are increasingly partnering with specialized service providers to get their lease abstraction done within the timeline.

Springbord offers dedicated lease abstraction services, helping businesses streamline the process, ensure data accuracy, and meet ASC 842 compliance deadlines without overburdening internal teams.

How to Prepare Your Lease Portfolio for ASC 842

Before starting the abstraction process, take these preparatory steps to ensure a smooth and efficient transition:

1. Identify all active leases across entities.
2. Digitize physical lease records.
3. Prioritize high-value and complex leases first.
4. Align stakeholders (legal, finance, operations) for smooth execution.

Best Practices for Successful Lease Abstraction

• Standardize your abstraction templates.
• Use technology to streamline extraction.
• Implement a two-step review for quality assurance.
• Consider outsourcing for scalability and accuracy.

Managing the task within the stringent timeline 

As mentioned, lease abstraction is a time-consuming process but one of the most critical aspect of complying with the new accounting standard. It would be detrimental to underplay the requirement of and effort involved in lease abstraction. 

Whether you decide to outsource lease abstraction, implement a software, or ramp up in-house resources, irrespective of what approach you choose, time is the key factor. With ASC 842 just couple of months away from going live, navigating every process and aspect with efficiency is critical. Private companies need to act now and get their lease portfolio abstracted so that they can successfully populate every important and required information on the accounting system timely and efficiently.

Benefits of Outsourcing Lease Abstraction for ASC 842

Outsourcing lease abstraction allows companies to focus on core operations while ensuring compliance with complex accounting standards. By leveraging the expertise of specialized service providers, you can handle large volumes of leases without straining internal resources. This approach not only accelerates timelines but also enhances accuracy and reduces compliance risks.

Following these proven practices can help you achieve accuracy, efficiency, and compliance in your lease abstraction process:

• Faster turnaround time.
• Access to trained lease abstraction specialists.
• Improved accuracy and compliance.
• Cost efficiency compared to building in-house teams.

Wrap-Up: Act Now for Compliance and Efficiency

Timely and accurate lease abstraction is the cornerstone of ASC 842 compliance. Delays or inaccuracies can lead to accounting errors, increased risk, and missed deadlines. By acting now, you ensure that your lease portfolio is ready for reporting requirements while unlocking the benefits of better data management and decision-making.

At Springbord we have been helping companies manage their lease portfolio efficiently, minimize risk, ensure compliance, integrate with other platforms, and improve lease data management. To know more about our Lease abstraction services, connect with us today!

FAQ

1. What is ASC 842 and why does it matter for lease abstraction?

ASC 842 requires companies to record detailed lease data on the balance sheet, making accurate abstraction essential for compliance.

2. Why is lease abstraction important for ASC 842 compliance?

It ensures all critical lease details are captured accurately and on time to meet reporting requirements.

3. What challenges do companies face with lease abstraction?

High volumes, complex terms, multiple addendums, and tight deadlines make the process resource-intensive.

4. Should I outsource lease abstraction or keep it in-house?

Outsourcing often delivers faster, more accurate results with lower costs compared to in-house scaling.

5. How long does lease abstraction usually take?

Timelines vary by volume and complexity, but outsourcing can significantly speed up delivery.

6. What are the risks of inaccurate lease abstraction?

Errors can lead to financial misstatements, audit issues, and compliance failures.

7. How can Springbord help with ASC 842 compliance?

Springbord provides skilled teams, proven processes, and advanced tools to ensure timely, accurate abstraction.

8. What lease information is most critical for ASC 842 reporting?

Key data points include lease term, payment schedules, renewal options, termination clauses, and discount rates — all of which must

9. What is the main benefit of outsourcing lease abstraction for ASC 842?

It ensures faster, more accurate data extraction while reducing the burden on your internal team, helping you meet compliance deadlines with confidence.