Top 10 Year-End Lease Accounting Challenges and Solutions for ASC 842 Compliance

As year-end approaches, controllers and CFOs face unique challenges in lease accounting, especially under ASC 842’s stringent requirements. Here, we explore ten common hurdles in preparing accurate financial statements and prescribe strategies to mitigate them effectively.

Data Accuracy

• The Challenge: Ensuring lease data (terms, payments, interest rates) is accurate across systems is challenging, particularly with manual processes or scattered data sources.


• How To Resolve: Centralized Lease Data Management via software consolidates data into a single source of truth, reducing discrepancies and improving accuracy.

Data Completeness

• The Challenge: Incomplete lease data can lead to inaccuracies in financial reporting, especially for companies managing complex lease portfolios.


• How To Resolve: Use a Year-End Lease Audit Checklist to cross-reference each lease with required data points (e.g., lease dates, payment schedules) and assign a team member to oversee data completeness.

Lease Modifications and Reassessments

• The Challenge: Mid-year lease modifications or terminations require complex re-measurements under ASC 842.


• How To Resolve: Real-Time Update Protocol ensures that lease modifications are recorded immediately, especially when using software that automatically tracks and adjusts lease changes.

Disclosure Requirements

• The Challenge: ASC 842 mandates extensive lease-related disclosures, including cash flow projections and significant terms.


• How To Resolve: Automate Financial Reporting through lease accounting software that generates compliant disclosures, ensuring data points are updated throughout the year for seamless year-end preparation.

Cross-Departmental Coordination

• The Challenge: Effective lease accounting relies on strong collaboration between departments such as accounting, IT, and operations.


• How To Resolve: Establish a Year-End Communication Plan with regular cross-departmental meetings and a point person in each area to ensure data flow and quick issue resolution.

Audit-Readiness

• The Challenge: Preparing lease data for external audits is complex without organized, up-to-date records.


• How To Resolve: Pre-Audit Testing helps ensure lease data aligns with audit standards. Document control and organized lease document storage also support audit readiness.

System Integration

• The Challenge: Integration between lease accounting data and ERP systems is essential, especially for organizations with large lease portfolios.


• How To Resolve: API Integration or Software with ERP Connectivity reduces manual entry and enhances data accuracy, making reconciliations easier and faster.

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Impact on Financial Ratios

• The Challenge: Lease accounting changes can affect financial ratios (e.g., debt-to-equity), which can be critical for stakeholders.


• How To Resolve: Quarterly Ratio Impact Analysis enables CFOs to track how ROU assets and lease liabilities affect financial ratios, preparing them for stakeholder discussions on potential impacts.

Lease Payment Timing and Accruals

• The Challenge: Accurately recognizing lease payments, especially accruals, is critical for year-end alignment.


• How To Resolve: Automated Payment Scheduling ensures accurate lease payment recognition, aligning entries with financial statements and eliminating manual adjustments.

Managing Short-Term and Low-Value Leases

• The Challenge: Short-term and low-value leases are excluded from balance sheets but require tracking for accurate reporting.


• How To Resolve: Software for Tracking Exempt Leases Separately ensures these leases are managed outside of balance sheets while maintaining accurate expense reporting.

How iLeasePro Supports Year-End Lease Accounting Challenges

iLeasePro provides a comprehensive solution tailored to meet the challenges of ASC 842 compliance and year-end closing. Its centralized lease data management eliminates manual processes, enabling controllers to capture all lease details accurately in one place. With automated tracking of modifications and API integrations with ERP systems, iLeasePro streamlines workflows and reduces the risk of error. Built-in disclosure reporting tools simplify compliance by generating ASC 842-compliant statements, while its audit-ready documentation ensures data is always prepared for scrutiny.

By leveraging iLeasePro, companies can reduce the time, errors, and stress associated with year-end financial preparation, ensuring accurate, compliant, and efficient lease accounting every year-end.

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