Lease Accounting Solution for IFRS16, IAS17 and ASC842

What is Lease Accounting?

Lease accounting is the process by which a company records the financial impacts of its leasing activities. For several years, operating leases that meet specific classification requirements must be recorded on a company's financial statements as a right-of-use asset and a lease liability.

The anticipated lease payments and a discount rate are key ingredients to calculate the lease contract's net present value to be capitalized on the balance sheet.

Generally having large volumes of operating lease contracts for buildings, cars and other types of equipment, companies need to implement a robust and scalable solution that automates the calculations and journal entries, and at the same time provides for sufficient traceability and auditability of those calculations.

The Lease Accounting Solution for OneStream provides the intelligence, usability, scalability, traceability, and auditability required to process hundreds or even thousands of lease contracts as a seamless experience within the OneStream platform.

Leveraging OneStream's own Reporting Compliance app, the solution is compliant with both the IFRS16 and the ASC842 lease accounting standards and provides the required offsetting amounts in order to neutralize the lease expenses as recognized under local GAAPs.

The journal posting scheme proposed by the solution not only covers the income statement and balance sheet positions but details the postings down to the individual transaction types utilizing OneStream's Flow dimension.

Key Features

Some of the solution key features include the option to mass upload lease contracts using a standardized Excel template, to simulate lease contract journal postings in a simulation dashboard prior to processing the lease contracts in the register, to run lease contract lifecycle reports to validate the lease amounts as included over time in the accounting ledgers (even after modification events), and to export the IFRS16, IAS17, ASC842 journals either directly into a consolidation cube in OneStream, or to export those journals in a flat file extract for uploading into a general ledger.

The solution furthermore can deal with typical lease contract characteristics such as non-linear payment schedules, varying payment frequencies, extension options, termination options, purchase options, but also with more advanced characteristics such as lease contracts in a foreign currency, that require the revaluation of the lease liability into the company's functional currency.

To provide maximum accuracy and flexibility, the solution utilizes a daily interest calculation engine, meaning that lease contracts can be started, modified, and ended on any day of the month.

Lease Accounting Principles

  • IFRS16 compliant
  • compliantASC842 compliant
  • Bridge from IAS17 and local GAAPs

Solution Philosophy

  • Collaboratively developed by several OneStream Diamond Partners
  • Variable annual subscription fee based on the number of contracts
  • Non-encrypted app installation with unlimited usability

Solution Features

  • Lease contract mass upload supported by Excel template
  • Export IFRS16 / ASC842 journals directly into the cube or in a CSV extract for the general ledger
  • Review monthly lease amounts in a simulation dashboard prior to processing in the database
  • Run lease contract lifecycle reports to validate the lease amounts as included in the accounting ledgers, even after modification events

Lease Contract Characteristics supported

  • Lease contract and lessor name
  • Asset class details
  • Profit center details
  • Linear payment schedule
  • Non-linear payment schedule to cater for specific situations like rent-free periods and fixed indexation agreements
  • Advance or arrears payments
  • Contract currency payments, leading to monthly revaluation of the lease liability
  • Non-lease components
  • Upfront payments
  • Residual value guarantees
  • Various payment frequencies, including monthly, quarterly, semi-annual, and annual payments
  • Contract start date and end date at any day of the month
  • First payment date different from lease start date
  • Daily interest calculations
  • Contract extension option(s), including active or inactive flags
  • Contract termination option, including a penalty and active or inactive flags
  • Asset purchase option, including a purchase price and an economic life amortization schedule
  • Lease contract modifications at any day of the month
  • Lease contract simulations
  • Lease contract posting schedule including balance sheet activity (flow) details to support disclosure schedules and cash flow requirements
  • Lease contract comparison versus prior period(s)
  • Lease contract audit logs
  • Centrally maintained discount rate table with the option for the user to override that in the contract

Partner Community Initiative

The solution is collaboratively developed and maintained by a growing ecosystem of OneStream partners, co-developed by these OneStream Diamond Partners: AIQOS | Inplenion | avvale | cpmview | INLUMI. Utilizing the wisdom of the crowd has allowed for a pooling of many years of experience in the areas of lease accounting as well as of OneStream app development.

The solution is delivered with unencrypted business rules, meaning that there is no dependency on any third party and the solution furthermore can be customized exactly to the needs of the user.

Pricing

The graduated subscription fee, is rich in features, and cover all aspects of the lease accounting process - thanks to the initiative of the OneStream partner ecosystem.

Contact us

Would you like to know more about optimizing the Lease Accounting process for your organization? Please contact Laila Nørgaard.