Which IWMS Vendors Are Benefiting From The Changes In Lease Accounting?
Early 2016, the US Financial Accounting Standards Board’s (FASB) and the International Financial Accounting Standards Board’s (IFASB) issued new lease standards, which require companies to include lease obligations in their balance sheets. The new standards take affect 1 January 2019 and will impact all companies that have leases for real estate or equipment and file financial statements.
This will be a significant pain point for many firms as they will need to evaluate their system for collecting and organising lease data, apply the relevant accounting treatment and generate the correct ledger entries. Using spreadsheets to collect, analyse, store and report on all leases is horribly messy and prone to introducing errors - not only because Excel lacks specialised lease accounting tools but also because of its susceptibility to human errors when large data sets are managed by multiple users. Risk of non-compliance fees will become a major concern for firms.
For many years IWMS software providers have provided real estate, leasing and portfolio capabilities, which include modules that integrate details of leases and contracts with existing financial and accounting systems to provide a central database for real estate financial planning and analysis and to create the correct entries for the accounting system. The new FASB/IFASB accounting standards bring the spotlight on the role of software in managing leases.
A review of the deals in the public domain shows that providers such as Accruent, Lucernex and Qube are already swooping in on opportunities to help companies mitigate risk by ensuring compliance to these new leasing standards. In the last few months, Lucernex has announced several new contracts with retailers such as Bouclair, DXL, Bashas’ Family of Stores and Suburban Propane. Accruent has been selected by CTIL, Tillys and Sephora in just the last few weeks. We are also witnessing other IWMS vendors improving their capabilities for accurate lease calculations in accordance with the new lease accounting standards. For example, in April, Planon’s software received validation from a Big Four accounting firm that its leasing calculations engine was in accordance with the IASB/FASB requirements.
To learn more about the critical checkpoints to consider before investing in an IWMS solution, see our recent report - IWMS: What You Need To Know Before Buying A Solution