Implementing the New Lease Accounting Standard in SAP Landscapes: The Road to Compliance

Implementing the New Lease Accounting Standard in SAP Landscapes
Implementing the New Lease Accounting Standard in SAP Landscapes: The Road to Compliance

A new lease accounting standard will become a requirement for companies starting on January 1, 2019. This paper provides background on the standard and recommends a specific technological solution, SAP Lease Administration by NAKISA, for lessees, to allow for process automation, consistent controls, transparency for lease reporting, and analysis of asset utilisation.

Asset leasing is a common business practice among companies in all industries. It allows businesses to utilise real estate, equipment, transportation assets and technology to support operations and functions on a day-to-day basis while providing flexibility and control over working capital. Traditional accounting rules require leases to be classified as financial (capitalised on the balance sheet) or operating (expensed in the profit and loss [P&L] statement), based on the intended use and ownership of the underlying asset. Historically, this provided a structure that allowed off-balance sheet financing, affecting the company’s debt and liability posture. To help address this issue and ensure consistency in financial reporting, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) jointly developed a new standard, ASC 842, as part of a global convergence effort. This new standard will require lessees to recognise a lease liability and a right-of-use asset for all leases (except those with a duration of less than one year) when the underlying asset becomes available to the lessee. The introduction of the new standard requires both lessees and lessors to evaluate its effect on the business processes, policies, financial statements, technology and internal controls within their company.

Lease Accounting Standard Effective Dates

Lease Accounting Compliance Considerations

In order to comply with the new lease accounting rules, companies must define a comprehensive approach and compliance road map that not only include the policies and procedures for processing assets, but also the technology and automated controls to support the updated accounting practices and comply with reporting requirements. The table below outlines the key considerations along this process, with guiding questions to address each consideration.

SAP Lease Administration by NAKISA® (SLAN)

To effectively address the new lease accounting standards, companies are turning to SAP Lease Administration by NAKISA (SLAN) because it is the only solution that can effectively manage all types of leases.[1] The SLAN solution is integrated with the SAP core application and manages the full lease lifecycle for lessees, from initiation to termination of the lease. This includes:

  • Lease determination
  • Data capturing
  • Lease agreement and contract management[*]
  • Assignment of lender, supplier and fixed assets[*]
  • Classification, amortisation, accruals and payments[*]
  • Event management and workflows
  • Equipment tracking
  • Standard lease-related reporting and disclosure reporting
[*]Integrated with SAP

SLAN Solution Offerings


Using a comprehensive end-to-end solution has a number of benefits. It allows companies to be scalable and consistent as they grow and handle complex leases (e.g., multiple schedules), reduces the risk of penalties due to noncompliance, provides a global view of all lease data and the associated impact on financial statements, and supports statutory lease reporting.

A few of the key reasons companies are choosing SAP Lease Administration by NAKISA®:

  • Product was developed jointly with SAP with leases in mind: The solution provides a central repository for lease contract administration and lease reporting, thus enabling end-to-end management and accounting for all leases on a single platform.
  • Meets SAP premium qualification requirement: Though there are a number of lease accounting software products on the market, only a few meet this requirement, which tests and validates programs for security, performance, supportability, accessibility and documentation.
  • Integrates with SAP ERP Central Component (ECC) The solution provides native integration to the SAP ECC environment with real-time connectivity. This eliminates the need to build and support custom integrations.
  • Is sold and supported by SAP: This ensures that the product will be supported long-term.

Why Protiviti?

Protiviti supports companies in meeting their lease accounting standard requirements beyond the capabilities that traditional contractors, system integrators or accounting firms provide. We bring deep cross-functional expertise in financial accounting, business process improvement and systems implementation, among other competencies. This, combined with our SAP expertise and NAKISA partner status and access to Robert Half resources and staffing, allows us to create a uniquely qualified, comprehensive approach to projects to comply with the new lease accounting standard and achieve the necessary business transformation.

We assist companies in the following areas:

Impact Assessment and Solution Design

We perform a gap analysis to understand your current state and design the road map for implementing SAP Lease Administration by NAKISA®.

Lease Discovery and Data Collection

The initial discovery of all the leases can be a significant task depending on the number, locations and variety of leases; whether they exist electronically or on paper; and other factors. Our proven methodology, combined with access to experienced resources from our parent company Robert Half, allows us to efficiently identify and capture all data from leases globally.

Process and Reporting Optimisation

To maintain the lease accounting standard over the long term, companies will need to implement new financial policies and processes, train accounting staff on these changes, and generate new types of reporting based on each company’s business requirements. Protiviti is a leader in financial and business process optimisation, and our SAP visualisation technical experts can support reporting requirements of any complexity.

System Implementation

As a Gold partner with SAP and a leader in the SAP compliance and finance community, Protiviti can be your single qualified partner in the implementation of SAP Lease Administration by NAKISA®.

Control and Process Documentation and Training

Large-scale changes to processes and controls require retraining of individuals and significant amounts of new documentation and training materials. Protiviti can assist with the development of these materials, including online learning scenarios, and facilitate employee training sessions.

Project Management

The timelines for adoption of the new lease accounting standard are firm, and companies increasingly are becoming aware that the complexity is higher than expected. Protiviti can provide project management expertise and the required compliance, financial and systems implementation knowledge to successfully assist companies in meeting the deadline.

[1]SLAN is part of SAP’s package of automated lease solutions, which includes SAP Real Estate Management and SAP Leasing