As you’ve probably experienced, lessors face unique challenges when it comes to sales-type leases under ASC 842. We’ll explore solutions to these challenges, including the unique role AI has to play in ensuring your sales-type leases are dealt with effectively, accurately, and with minimal hassle and full compliance.
Common challenges in lessor accounting
Several elements make sales-type leases particularly complex areas for lessors. These include:
- Complex calculations: Systems currently lack the ability to automate the calculations based on the impact of sales-type leases – specifically, manually calculating the implicit rate for each contract becomes increasingly difficult.
- Surging data volumes: Managing a large volume of assets and leases is demanding at the best of times, and at some point, this becomes almost impossible without a dedicated solution. For example, HPE has billions of dollars in lease receivables, likely representing thousands of individual leases.
- Modifications: Dealing with amendments to existing leases such as term or payment changes can be time-consuming and cumbersome in Excel models.
- Compliance challenges: In ensuring compliance with ASC 842, several issues arise. For example, the calculations and judgments in estimating lease receivables and residual assets can be complex, impacting the accuracy and timeliness of reporting.
What’s more, lessors often misclassify leases due to incorrect assessment of criteria like ownership transfer or purchase options. Another common error is improper accounting for lease modifications, which requires reclassification and remeasurement of lease receivables and residual assets.
In short, a solution is desperately needed to help organizations manage this critical area. Currently, however, there are few tools that can effectively address sales-type leases for lessors. While some companies may claim this functionality, anecdotal evidence from conversations with partners and customers indicates that this is not the case.
Until recently.
Streamlining Sales-Type Leases for Lessors
Trullion is a leader in AI-powered lease accounting solutions, offering cutting-edge technology to simplify and enhance lease accounting.
Now, Trullion presents its for sales-type leases for lessors. The features and benefits of Trullion’s platform include:
- Streamlined document uploads: Upload multiple lease documents effortlessly with our one-click feature, saving you valuable time.
- Collaborative interface: Easily adjust user access and workflows for your team, all within Trullion’s collaborative platform.
- Efficient modifications: Creating modifications and updating the calculations.
- Auditable reporting: Generate fully auditable journal entries and disclosure reports, with source data always accessible at your fingertips.
With Trullion, lessors are able to address common challenges, while enjoying significant benefits unavailable elsewhere:
- Efficiency and scale: Automatically recognize all necessary data points for a high volume of sales-type leases while allowing for easy modifications with a reduced risk of errors.
- Compliance and accuracy: Ensure your financial statements still comply with the latest accounting standards (e.g. ASC 842) with precise and automated calculations on all impacted financial statement line items.
- Integrated reporting: Seamlessly generate and export the required journal entries and detailed investment in lease disclosures required for financial reporting.
Explore Trullion’s AI-powered lease accounting platform to simplify your sales-type lease processes and ensure compliance with ASC 842: get started here.