Why Leases Suddenly Got So Complicated
New leasing standards like ASC 842 and IFRS 16 fundamentally changed how companies account for real estate and equipment leases. Most operating leases now sit on the balance sheet as right-of-use (ROU) assets and lease liabilities, with complex rules for measurement, remeasurement and disclosure. Spreadsheet-based tracking may have worked for a few simple leases—but it struggles when you have hundreds of locations, vehicles or equipment lease contracts.
Key Challenges in Lease Accounting
Finance teams face several recurring issues:
- Gathering all lease contracts and amendments into a complete inventory.
- Determining lease terms, options, discount rates and classification.
- Calculating ROU assets and lease liabilities accurately over time.
- Handling modifications, partial terminations and reassessments.
- Producing required disclosures for auditors and regulators.
Manual methods simply don’t scale for these tasks.
What Lease Accounting Software Brings to the Table
Dedicated lease accounting solutions provide:
- Centralized lease repository with key terms, documents and metadata.
- Automated present value calculations for ROU assets and liabilities.
- Generation of amortization schedules for lease expense, interest and principal.
- Support for multiple standards (ASC 842, IFRS 16, local GAAP) in parallel.
These tools integrate with ERP, posting entries directly to GL and simplifying reconciliation.
Handling Modifications and Reassessments
Real-world leases change over time: options exercised, floors expanded, rent concessions granted. Lease accounting software can:
- Track events and modifications tied to each lease.
- Recalculate ROU assets and liabilities according to standard-specific rules.
- Maintain a full audit trail of changes, assumptions and approvals.
This reduces the risk of misstatements when lease terms evolve.
Connecting Lease Accounting to Real Estate & Operations
Leases are not just an accounting issue—they’re operational and strategic. Integrating lease software with real estate and facilities systems can:
- Provide visibility into lease expirations and options across the portfolio.
- Support footprint optimization decisions (renew, consolidate, relocate).
- Align accounting treatment with actual usage and occupancy.
Finance becomes a partner in real estate strategy, not just a compliance function.
Final Thoughts
Lease accounting under ASC 842 and IFRS 16 is inherently complex, but it doesn’t need to be chaotic. With specialized lease accounting software integrated into your finance stack, you can maintain compliance, support audits and provide leadership with a clear view of lease-related assets, liabilities and costs.