The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) announced accounting standards that define how organizations must account for leases. Essentially, these accounting standards stipulate most leases must be reported on each company’s balance sheet, increasing the risk of regulatory noncompliance and inaccurate statutory reporting.
SAP Contract and Lease Management is used to optimize the portfolio of global assets and supports the regulatory compliance of these new accounting rules. This solution provides a single point of entry for collection, validation of lease contract data, performs valuation calculations and generates the financial postings derived from these calculations.
Which Customers are affected?
- Every IFRS/ US-GAAP reporting company renting real estate or leasing equipment will be impacted by the new standards
The leasing standards represent more than accounting changes. They force business process change and with any business or process change, there’s going to be some level of impact on systems and technology.
The Solution enables close collaboration between the lease administrator, lease accountant and fixed asset accountant. They access the same lease record, with all calculations being based on the terms and conditions of the abstracted lease. The lease transaction provides separate authorizations to ensure a clear separation of duties. The following illustration highlights the coordination between the different departments provided within the solution.
In addition to capturing contract terms and conditions, It is specifically designed to support real estate leasing processes such as managing critical dates, exercising renewal options, early terminations, rent escalations and sales based rent. The highly flexible and extendable forms collect industry- or business-specific- attributes and enables users to stay ahead of the game. Periodic posting runs automatically generate all lease payments based on the terms of the current lease agreement with real time integration into SAP Financials.