Everything you need to know about lease accounting: stay compliant with FRS 102 and ASC 842, boost efficiency, streamline processes, and meet rising audit requirements.
February 27, 2026
2026 marks a pivotal year for lease accounting. With FRS 102 now in effect, ongoing ASC 842 updates, and heightened auditor scrutiny, finance teams need a proactive strategy
In 2026, finance teams face multiple pressures: FRS 102 is now mandatory for companies operating in the UK and Ireland, triggering first-time ROU asset recognition. Meanwhile, organisations under IFRS 16 and ASC 842 are experiencing modification fatigue—rent adjustments, lease extensions, and terminations require constant remeasurement. Public sector entities face GASB 87 completeness audits demanding evidence of every lease, plus GASB 96 compliance for Subscription-Based Information Technology Arrangements (SBITAs).
Compliance expectations vary depending on local frameworks and jurisdictions:
Beyond meeting compliance requirements, centralising lease data creates practical advantages for forecasting and decision-making. By automating lease accounting processes and establishing a single source of truth, finance teams can reduce manual errors, strengthen controls as portfolios scale, and leverage leasing data to build more insightful forecasts for stronger decision-making.
Post-implementation, companies have faced common challenges moving away from manual, legacy processes (i.e., keeping lease data off the balance sheet). As of now, modification and remeasurement recording need to be more comprehensive (and therefore more complex).
Finance teams that rely on manual data management face fragile formulas and version control issues, making compliance and forecasting harder than they need to be.
Common audit findings and control issues still include incomplete lease populations (including embedded leases), inconsistent discount rate assumptions, and weak change controls for modifications.
Manual lease recording via spreadsheets has always been an ad hoc, short-term fix. Businesses looking to scale and move into data-driven decision-making need technology-enabled controls and audit trails to build a single, authoritative source of truth. The right data consolidation and centralisation platform can help to build consistency and stronger predictive analyses, for example.
Changes in lease accounting in 2026 fall under two key categories: regulatory signals and operational priorities. The former refers to new framework suggestions established by global regulators, and the latter to changes business owners should ideally make to their data recording and ESG expectations.
Regulatory Signals
It’s important to remember that FASB, GASB, and IASB offer signals for accounting changes through implementation guidance, not always confirmed legal requirements (at the time of writing, though international jurisdictions may vary). Changes to these framework signals, however, indicate that companies need to focus now more than ever on maintaining accurate, supportable balances.
For government entities, GASB 96 implementation continues to present challenges. While effective for reporting periods beginning after June 15, 2022, many governments are still working through initial adoption and discovery. Unlike traditional leases centralised with facilities teams, SBITAs are often procured department-by-department through IT or individual programme budgets. This decentralisation makes complete identification difficult—especially for smaller software subscriptions that meet GASB 96's capitalisation thresholds but bypass central procurement processes.
Operational Priorities
Operationally, companies must be prepared for auditors to focus more on their lease modifications and reassessments. What’s more, they must back up their data-driven decision-making with consistent judgements and provide hard evidence for all lease accounting (should auditors request it).
Auditors now expect detailed evidence for discount rate assumptions, lease term judgements, and modification accounting:
Preparing this information early and using the right technology reduces audit risk and improves forecasting visibility.
The changes to lease accounting not only affect financial compliance and reporting, but also have a broader impact on organisational processes. Modern lease accounting requires alignment between different departments to keep data, workflows, and accountability transparent.
Data silos form when information is managed separately across departments, limiting its availability for cross-functional use. In these environments, accountability is often distributed. Finance oversees financial reporting while legal manages contracts and real estate manages assets - each of which influences leasing decisions and balance sheet outcomes.
A structured lease accounting process helps bring these data streams together, creating a shared source of truth across finance, legal, and real estate. By centralising lease data and standardising reporting, organisations gain clearer visibility into obligations and strengthen the quality of financial reporting.
Lease accounting is one component of financial performance management. Managing it effectively requires more than compliance–it requires a unified platform that connects data, workflows, and accountability across the organisation.
Prophix One supports this by acting as the “translation layer” between finance, legal, and real estate. Through integrated workflows and shared visibility, teams can coordinate more effectively, maintain control over critical data, and stay aligned throughout the lease lifecycle.
The result is not only stronger compliance, but a centralised, authoritative source of truth that supports accurate financial close, governance, and organisation-wide accountability.
To meet compliance expectations set for 2026, finance teams need to focus on identifying and recording complex lease modifications, finding off-balance sheet and embedded leases, and addressing pressures surrounding ESG and sustainability disclosures seriously. They must juggle these challenges while ensuring that lease data is accurate and supportable, as expectations emerge and evolve.
Government entities face an additional layer of complexity: identifying SBITAs under GASB 96. Unlike real estate leases that flow through facilities departments, software subscriptions are scattered across IT, programme areas, and individual departments. Cloud-based platforms, SaaS arrangements, and hosted software agreements often bypass central procurement, making discovery difficult. Finance teams must establish processes to capture these arrangements before year-end—auditors expect complete SBITA populations just as they do for lease populations under GASB 87.
Beyond this, integrating systems and adjusting processes to fit new lease compliance expectations is a further challenge, especially for companies still reliant on manual processes.
Finance teams must move towards centralising data, controls, and analytics, and building clear review templates and processes to automate lease capture and recording in line with expectations. Analytics and structured review processes can help surface potential embedded leases in spend and contract data, which teams can then validate.
Through AI-powered insights via Prophix One Intelligence, finance teams can start to find lease information and build these review processes more efficiently, therefore reducing manual effort.
Crucial tasks for lease accounting compliance will vary depending on your jurisdiction. However, the following practical steps apply globally, supporting a smoother transition to meeting expectations in 2026.
Building a future-ready lease accounting system enables stronger strategic planning and more efficient data handling. Therefore, finance teams must focus on centralising data, removing and upgrading legacy technology, and reviewing processes regularly.
Centralise lease data in one accessible system. Move from spreadsheet schedules scattered across departments to a purpose-built lease accounting system. Ensure real estate, legal, and finance teams work from the same lease repository—so modifications, renewals, and terminations are captured immediately, not discovered at year-end.
Establish a modification workflow. Create a standardised process for capturing lease changes as they happen: rent escalations, early terminations, exercise options, sublease arrangements. Waiting until year-end creates remeasurement backlogs and audit issues.
Replace manual processes with automation. Transition from Excel-based calculations to software that automates journal entries, amortisation schedules, and disclosure reports. This reduces errors, speeds up close cycles, and frees your team for analysis rather than data entry.
Train teams on lease accounting requirements. Ensure accounting personnel understand what triggers remeasurement, how to calculate ROU assets and liabilities, and which lease terms require disclosure. Cross-train real estate and procurement teams to flag embedded leases in service contracts before they're signed.
Build cross-functional collaboration. Establish regular touchpoints between finance, legal, and real estate to review upcoming lease events, align on contract terms, and ensure data accuracy before close.
The lease accounting landscape in 2026 is defined by multiple simultaneous pressures: FRS 102 first-time adoption, relentless ASC 842 and IFRS 16 modifications, GASB 87/96 completeness audits, and auditor demands for airtight documentation. Spreadsheets weren't built for this level of complexity—they create compliance risk and hide the strategic value locked in your lease data. Start by conducting a complete lease and SBITA population audit across all departments, then establish centralised workflows that capture modifications in real-time rather than at year-end. The right lease accounting software doesn't just solve compliance; it transforms lease data into a competitive advantage for forecasting, space planning, and capital allocation decisions.
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FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland. (n.d.). In FRC (Financial Reporting Council). Retrieved January 19, 2026, from https://www.frc.org.uk/library/standards-codes-policy/accounting-and-reporting/uk-accounting-standards/frs-102
Guide for ASC 842 Lease Accounting with Examples. (n.d.). In Prophix. Retrieved January 19, 2026, from https://www.prophix.com/blog/asc-842-lease-accounting
Lease Accounting Software. (n.d.). In Prophix. Retrieved January 19, 2026, from https://www.prophix.com/use-case/lease-accounting
