For many years, it was only capital leases for equipment that had to be included on company balance sheets. Corporate real estate leaders could obtain most of the necessary reporting details from lease abstracts.
But with new lease accounting standards from the Financial Accounting Standards Board (FASB), both capital and operating leases have to be included on the company balance sheets. This requires greater accountability on the part of corporate real estate leaders and more data than a lease abstract is able to provide.
Before you can get your financial data in order, you need to know which lease accounting details to track. These go beyond the objective details you’ll find in your lease abstract.
A company’s finances and operations are bound to shift after a property or asset lease is signed. It might be best for you to end a lease before the agreement end date, or perhaps you’ll be in the market to purchase the property or asset. These decisions will ultimately impact the data you need to report on. By consulting your lease accounting partners, you can ensure you remain compliant with lease accounting standards.
Based on current market conditions, the estimated value of property or an asset can vary. While there is a number attached to this, the constant change of market conditions makes it impossible to calculate in advance. Instead, corporate real estate leaders have to look at the value of comparable properties in the surrounding area with the same tenant types and determine a rate based on their assessment.
As dictated by Generally Accepted Accounting Principles (GAAP), companies are required to report the full acquisition costs for fixed assets. What also needs to be accounted for, though, is how the value of an asset depreciates over time. This involves consulting the GAAP useful lives and salvage values tables for each asset. Through the combination of asset management software and lease accounting software, businesses can easily access these details and maintain compliance with new lease accounting standards.
When choosing a lease accounting software, research is an essential step. Taking the time do this will help you make the most out of your investment.
Here are some tips to guide you through the process:
It’s no secret that assets are crucial to the office experience. But just as important as the assets themselves is the ability to effectively visualize and track their every detail—lease terms included.
With iOFFICE’s asset management software, companies can easily store and monitor lease contracts for all assets throughout their lifecycle. A partnership with Visual Lease, a lease accounting management software provider, enables you to run lease reports as well as see data directly from our IWMS.
What’s more is that, as your organization experiences growth, the solution evolves with you. New leases can be added into the system over time and customized reports can be created to account for your needs.