Top lease accounting challenges

Without a doubt, for most finance teams, lease accounting can feel a bit overwhelming. There’s a lot of moving parts: shifting standards, growing compliance requirements and outdated processes are still in use. In this article, we break down today’s most common lease accounting challenges and how Prophix helps resolve them.

What is lease accounting?

Lease accounting is the process of recording, managing and reporting lease contracts under accounting standards like ASC 842 or IFRS 16. These standards require that almost all leases are recorded as liabilities on the balance sheet. This gives a more accurate and transparent view of the financial obligations of a business.

What are the top challenges with lease accounting today?

The challenge of lease accounting hasn’t gotten any easier. Finance teams are still grappling with basic compliance, even after the introduction of standards like IFRS 16 and ASC 842. During a recent Prophix webinar, a live poll showed that the biggest pain points are tracking lease modification milestones, staying up to date with compliance changes, and managing data silos.

What is clear is that many teams still rely on manual processes and disconnected systems, even though audit scrutiny and regulatory demands are on the rise. To stay compliant, finance teams need systems that take care of the details. When the rules are built in, there’s no guesswork. Just accurate, up-to-date reporting that reduces risk and keeps the process moving. Here are a few of the lease accounting challenges most finance teams deal with today.

Data management and accuracy

Errors and inconsistencies in lease data create ripple effects across reporting. Without centralized and validated information, even simple reporting tasks can become time-consuming and unreliable.

Ongoing compliance monitoring

Accounting standards change way too often. Keeping up with changes requires extensive knowledge and documentation, which unfortunately, burdens already backlogged teams.

Monitoring and tracking lease expirations

Many teams still use spreadsheets and manual tracking methods. This lack of visibility makes it hard to manage lease terms, extensions, and changes effectively.

Audit and control risks

Without automation and standardization, reconciling lease data and answering audit queries becomes more difficult. Disconnected tools increase the risk of error.

Employee training and expertise

Lease accounting is rarely a standalone role. Teams often learn on the fly, juggling multiple responsibilities. Without user-friendly software, this can become a major barrier to compliance.

Top challenges with lease compliance standards

New regulations including IFRS 16, ASC 842, and upcoming updates to FRS 102, bring a change in strategy. Each operating lease should now be recorded on the balance sheet as they carry greater visibility and complexity to operations.

That is an additional burden for finance teams. There is now a requirement to monitor remeasurements, compliance with useful life reassessments, compliance, and even journal entries. These tasks, without automation, are prone to errors and inefficiencies.

How Prophix can help overcome lease accounting challenges

In partnership with Cradle, Prophix offers a modern lease accounting solution directly on the Prophix One platform. Here’s how Cradle supports compliance and streamlines your lease process in Prophix One:

Effortless compliance with IFRS 16, FRS 102 and ASC 842

There is no need for second-guessing disclosures or recalculations. Thanks to the automated workflows and predefined templates, compliance is easy.

Foreign exchange accounting

With Forex built-in accuracy, you can now manage leases in different regions and currencies.

Controls for lease modification tracking

Controls for lease modification tracking keep you audit ready with automatic recalculation of schedules and updating of liabilities with term changes.

Customizable templates, workflows, and dashboards

Tailor your templates, workflows, or dashboards by team or processes to track lease impacts and KPIs and cut down on inefficiencies.

Centralized storage of lease documents

You will no longer waste your time looking for all your lease agreements and supporting documents since they are all stored in one system.

Improved audit preparedness

During audit season, audits will become easier with detailed audit logs and disclosure reports.

Better collaboration and communication

Every department's stakeholder can work with each other seamlessly without duplication of effort or confusion, all thanks to one source of truth.

See how Prophix solves your lease accounting challenges

Prophix can help you overcome your lease accounting challenges. Lease accounting software makes compliance effortless, reduces stress during audit preparations, and ensures accurate and easy to maintain reporting. Lease accounting is no longer a pesky bottleneck. Sign up for on-demand webinars to watch the full demonstration as well as learn more about lease accounting on Prophix One.