Risks of Using Spreadsheets to Comply with the ASC 842 Lease Accounting Standard

By | May 14, 2022

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The FASB ASC 842 Lease Accounting Standard for lease accounting is now in effect for both public and non-public companies.  This standard will be required of many business entities throughout the United States. The accounting change makes lease management and accounting much more complex. The ASC 842 accounting model requires more sophisticated financial calculations and mandates more monitoring and tracking of lease details. A recent survey found that more than one-half of the lessee organizations surveyed have used or still using spreadsheets to maintain and manage lease information.  There are inherent limitations in spreadsheets which will make it much more challenging to continue to use this type of outdated technology for lease management and accounting under the ASC 842.

Here are our Top Six Reasons to move away from spreadsheets.

1 – Potential for Misappropriation and Employee Errors.

Spreadsheets are not easily subject to the internal controls of the organization; therefore, the potential for misappropriation can be significant. For the same reason, there is greater risk of carelessness and unintentional error on the part of employees. One cell error can corrupt the entire calculation and create invalid amortization schedules and journal entries.  Can we even identify the the cell in error or the employee that might make a questionable change to the spreadsheet? 

2 – Difficulty of Audit and Review.

It is simply not easy to test the details and formulas embedded in spreadsheets, particularly as it pertains to complicated rent calculations. In the current environment where audit and review (especially in public business entities) are so important, this is a major drawback that cannot be overlooked.  Think about the requirements for internal control contained in Sarbanes Oxley, Dodd Frank and other similar directives.

3 – Collaboration

Information sharing is a critical element to an effective business environment. The ability to provide employees with easy access to information that will make them more productive is a key element to successful operation. Spreadsheets do not lend themselves to collaboration, particularly with organizations that have wide spread operations.

4 – Mobility

We live in a mobile business world. More and more businesses operate from remote locations or have employees that work at home or spend much of their time “on the road”. Maintaining critical information on spreadsheets that this type of employee cannot access simply does not work anymore.

5 – Not Scalable

As a business grows and the business information that must be tracked grows more voluminous, maintaining such information on spreadsheets becomes much more cumbersome. For example, spreadsheets do not lend themselves to portfolio level aggregation and dissemination of information by location. Complex spreadsheets, loaded with details, are sure to result in a less efficient operation.

6 – Not a Current Technology Solution

Last, but perhaps most importantly, spreadsheets are not the most current solution for information gathering and analysis that is available today. Spreadsheets were introduced at a time when there were limited technology solutions available. We now have more sophisticated cloud-based technology applications that are easy to use, intuitive and cost effective. Why wouldn’t a business take advantage of the latest technology?

A cloud based lease management and accounting technology solution can contain much more robust features as compared to the capabilities of spreadsheets. It is time to investigate fully all the alternatives that are in the marketplace to make your organization more nimble and effective.  iLeasePro and iLeaseXpress can assist in managing and accounting for your portfolio of leases in an efficient and cost effective manner.