Overview
The lease accounting standards IFRS16 and ASC 842 were effective as of January 1st, 2019 changing the way organizations track and report their real estate and equipment leases. As a lessee, your organization will have to capitalize all lease agreements and report them in the balance sheet recognizing their present value as right-of-use assets along with their corresponding financial liability. As new reporting requirements rise, the need of collecting and managing data creates a new challenge demanding an integrated system support, changes on business processes, and new audit controls.
Finding your software solution
SAP's Contract and Lease Management solution was released back in 2016 under the Flexible Real Estate module (RE-FX-LA) enabling the functionality required to support all relevant leasing and valuation processes and comply with the accounting regulations. Is available in both ECC and S4 HANA.
Key features:
Standardized leasing processes
Real-time valuation of finance leases
Unified platform for lease administrators and asset accountants
Support both operating and finance leases
Support both property and equipment leases
Manage parallel accounting requirements
The solution is available as per the following system versions (or higher):
* If your environment stands on a lower version, then an upgrade will be required.
In our experience, the solution can be divided in the following process areas:
Contract Management
Processes to create, amend, correct, adjustment, renew, and terminate payable lease agreements.
Processes to manage master data and BP.
Both property and equipment leasing processes are supported.
Inter-company and Subletting.
Payment Management
Processes to manage vendor payment commitments (open items in FI) based on the lease agreement's planned cash flows.
It is also possible to keep these processes on any other procure-to-pay solution such as MM, Ariba, or any other external system.
Valuation and Accounting Regulation compliance
Processes to perform the lease classification, measurement, re-measurement, and postings.
Support multiple accounting standards by using parallel accounting or different GL accounts. Comply with IFRS16, US GAAP (Operating & Finance), FR GAAP, IAS, HGB, among others.
Integrate with SAP Fixed Assets (FI-AA) or directly in the GL without a sub-ledger.
Define your scope
The following questions are critical to understand the level of effort and complexity that the solution may require:
Do you currently use any lease management and accounting software? If so are you planning to decommission, migrate or integrate with the new solution?
How many countries and company code should be in scope?
How many contracts are you planning to go live with?
Have you already classified your lease population?
How many people will be using the solution?
Do you manage finance leases (buy outs), operating leases, variable rent scenarios, or rent adjustments based on indexes?
Do you manage complex equipment processes (such as impairment)?
Do you manage Inter-company & subletting?
Do you manage non-recoverable taxes?
Which accounting standards should be supported by the new solution?
Do you use the New FI-GL (parallel accounting ledgers) or Classic?
Do you expect an integration with SAP FI-AA (New or Classic)?
Are you planning to process payments out of the new solution or keep them in MM, Ariba or other external systems?
How we can help?
We have helped over 10+ customers in 7 countries in the last two years from building their solution roadmap to implementing tailored and rapid deployment solutions maximizing their ROI. For more information, you may contact us at info@goldinmotion.net and we will be happy to assist you.
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