The coronavirus pandemic has dramatically impacted business operations around the world significantly altering financial disclosures, forecasts, and reporting processes. It has had a major impact on lease accounting particularly, the assessments and assumptions that were previously valid may no longer hold. This is making lease data management and accounting a herculean task further compounding the challenges for organizations across the globe.
Considering this interim disruption caused by the pandemic, IFRS 16 has also included new requirements in terms of disclosures and accounting that would account for the modifications/discounts. As lessors continue to offer rent concessions, organizations need to account for these changes based on the original terms and conditions of the lease contract and specific accounting guidelines.
Data management for lease accounting was already a tedious task, however, it has now added to the burden as new mandates by IFRS16 and ASC842 have put tremendous pressure on the organizations. That said, compliance is not optional, and therefore organizations will need to understand the impact of the pandemic and ensure they are prepared to carry out modification at scale to ensure accurate lease accounting and disclosures.
Covid-19 impact on a lease accounting
From discounts, impairment, abandonment, modification, terminations to renewal, the coronavirus outbreak has had a significant impact across various aspects of leasing and in turn lease accounting. Let’s look at some of the key impacts/disruption caused by the pandemic:
- Unprecedented abandonment and impairment of the right of use (ROU) assets at scale
- Dynamic and changing rent concessions and discount rates applied during lease modifications
- Reassessments, reevaluation of operating and lease costs
- Revenue recognition and recovery for lessors
In order to efficiently navigate these disruptions and meet changing lease accounting requirements, organizations need sophisticated data management processes.
Growing criticality of data management to ensure compliance
Organizations are already striving hard to regain their position and recover from the disruption caused by the pandemic. Add to that, tracking, capturing, and managing lease data for accounting while ensuring mass modifications are captured accurately is making the process not just time-consuming but intense, complex, and incredibly challenging.
As rent concessions, abandoned and impaired assets continue to happen across large portfolios, accurate, timely, and efficient lease data management will be of paramount importance. And seeing as how this is an unprecedented time, lease data management for accounting demands unique and specific capabilities. Plus, compliance during these times is even more time and data-sensitive, organizations need the right tools and skills to be able to quickly and efficiently organize and report lease data for lease accounting as per the new and modified standards.
Now more than ever, businesses should consider outsourcing data management for lease accounting to reliable partners who specialize in this domain. Such a service provider can not only help you meet compliance obligations effortlessly but also save time, cost, and effort while ensuring you have complete access to every critical lease data needed for accurate lease accounting, reporting, and management.
Springbord is committed to helping businesses across industries remain compliant especially during a crisis. Our data management services are designed to meet evolving industry requirements and we are geared to help you navigate these challenging times seamlessly. Talk to us today to find out how we can streamline your lease accounting process and empower you to make better business decisions through robust and efficient lease data management.