Lease Accounting and Financial Transparency: Getting Control Under ASC 842 and IFRS 16

ByBNW TEAM

If your company has leases, lease accounting is no longer a side task. Under ASC 842 (and IFRS 16 for many non-US reporters), most leases land on the balance sheet. That change was meant to improve transparency. In practice, it also made lease reporting a common source of errors, delays, and uncomfortable audit conversations.

The issue is rarely the accounting concept itself. It’s the process. Leases live across departments. Contracts get amended. Renewals happen. Key terms are interpreted differently by different people. If you are managing leases with scattered PDFs and a spreadsheet that is only updated at year-end, maintaining transparency and control will be complicated.

Lease accounting services are designed to fix that gap, not by “doing the math” in a vacuum, but by building a disciplined workflow that keeps lease data complete, current, and supportable.

Why leases affect transparency more than teams expect

Leases are long-term commitments. They also touch multiple areas of the business: real estate, operations, procurement, legal, and finance. When that information isn’t centralized, the financial statements reflect whatever finance was able to gather at the time of reporting.

Under ASC 842, that shows up quickly. Right-of-use assets and lease liabilities impact:

  • Balance sheet presentation
  • Debt and leverage ratios
  • Disclosures and audit focus areas
  • Internal forecasting and planning

When the lease population is incomplete or inputs are inconsistent, the financial statements may still “tie out,” but they do not tell the truth cleanly. That’s where transparency breaks down.

Where lease accounting usually goes wrong

Most lease accounting problems come from a short list of failure points. If you address these, the rest gets easier.

1) The lease population is not complete

Companies miss leases because contracts are stored in too many places or because no one owns the lease list. It’s also common to miss embedded leases inside service agreements.

2) Key terms are abstracted inconsistently

Two people can read the same lease and capture different data. Start dates, escalation clauses, incentives, termination rights, renewal language, non-lease components, variable payments. Errors here flow straight into the model.

3) Policy decisions are unclear or not applied consistently

ASC 842 requires judgment. Lease term and renewal assumptions are the big one. Discount rate approach is another. If those decisions shift by location or by preparer, the portfolio becomes inconsistent.

4) Modifications and reassessments are captured late

Leases change throughout the year. Space expands. Terms get renegotiated. Renewals get exercised. If changes are captured only during the annual scramble, you end up with late entries, audit questions, and rushed support.

5) Documentation is weak

Audit teams will ask how you determined key assumptions and how you proved completeness. If the support is not stored as you go, finance ends up rebuilding the story under deadline.

What lease accounting services can do to improve control

A good lease accounting service looks like a process owner, not a calculator. The work typically includes:

Building and maintaining a lease inventory

A central list with ownership. Completeness checks. A way to catch new leases and changes when they happen.

Standardizing abstraction and review

One template for key terms. A second set of eyes for validation. Flags for missing items that need follow-up.

Applying consistent policy decisions

Documenting how the company handles renewal assumptions, lease term, and discount rates, then applying that approach consistently across the portfolio.

Maintaining schedules and change tracking

Updating the lease schedules for new leases, amendments, terminations, and reassessments on a monthly or quarterly cadence.

Keeping audit support organized

Not just a folder of PDFs. Clear linkage between the lease, the key terms, and the assumptions used.

This is what improves transparency. Stakeholders can understand what is on the balance sheet and why, and finance can explain changes from period to period without having to guess.

Technology helps, but it doesn’t solve everything

Lease accounting software can make schedule maintenance easier, but it will not fix a weak process. Software depends on clean inputs and correct setup. It also can’t make judgment calls for you. Someone still needs to interpret the contract and apply policy consistently.

If a company implements software without tightening the upstream workflow, the tool becomes a faster way to produce unreliable outputs.

Better lease data supports better decisions

Lease accounting services can also make the business easier to manage. Once you have a clean lease inventory and consistent terms, leadership can get clearer answers on:

  • Location and asset commitments by site
  • Renewal and termination timelines

  • Long-term payment obligations

  • Planning impacts as the portfolio grows or changes

This is where lease accounting stops being a compliance headache and becomes a control point.

Where Guerrero Advisors fits

Guerrero Advisors supports lease accounting under ASC 842 with services such as lease abstraction support, calculation and schedule review, ongoing updates, and audit-ready documentation. The focus is simple: consistent inputs, clear policies, and a process that holds up across reporting periods.

Closing thought

Lease accounting is manageable when it’s treated like an operating process, not a year-end project. If you can maintain a complete lease inventory, standardize abstraction, apply policy consistently, and capture changes on a steady cadence, transparency and control follow naturally.

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