Leading HVAC manufacturer deploys artificial intelligence to meet new lease accounting rules
FASB’s new lease accounting guidance (ASC Topic 842), issued on February 25, 2016, requires organizations to recognize lease assets and liabilities on the balance sheet and disclose key information on lease transactions. For most companies with leased assets, the change significantly affects financial reporting. Companies must obtain key information through lease abstraction and populate a data template with that information to simplify the lease accounting process. The new standard changes the type of information required and includes details not typically held in accounting systems, so accounting departments will have to manually review leases to gather the required data elements.
A leading manufacturer of heating, ventilation and air conditioning equipment estimated it needed to process 700 to 800 lease documents to comply with ASC 842. The manufacturer voluntarily elected an early adoption date of April 2019 to allow adequate review and testing time, allowing only 20 weeks to complete the work.
Recognizing the complexity of completing this task successfully and on deadline, the company turned to Protiviti for help.
Locate and process an estimated 800 leases to comply with FASB’s new lease accounting standard months ahead of the year-end deadline.
A thorough lease discovery process revealed double the number of estimated leases. An AI solution was deployed to process most of the workload.
Project completed on time with significant savings and efficiencies: 15-20% reduction in project hours, 42% cost savings and up to 95% accuracy.