How LeaseAccelerator Makes It Easy to Transition to the New Lease Accounting Standard On Time

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1 How LeaseAccelerator Makes It Easy to Transition to the New Lease Accounting Standard On Time It s now official: The first deadline for transitioning to the new lease accounting standards as dictated by IFRS 16 and FASB ASC 842 is less than one year away. According to the recently announced final FASB standard, the deadline for income statement comparables is January 1, This will soon be followed by a January 1, 2018 deadline for balance sheet comparables and a January 1, 2019 implementation date for the new standards.

2 $3.3 Trillion in leasing commitments. More than 85% of these commitments do not appear on these companies balance sheets. These new capital lease accounting standards will require companies to transfer their operating leases onto their balance sheets beginning in Currently, leases need only be disclosed in the footnotes of companies financial reports. The impact of the new lease accounting standards will be huge: According to the International Accounting Standards Board (IASB), listed companies worldwide currently have approximately $3.3 trillion in leasing commitments. More than 85 percent of these commitments do not appear on these companies balance sheets. Companies with large operating lease obligations will be impacted the most by the new standards. These companies off-balance sheet leases can range from as little as a few million dollars to as much as tens of billions of dollars. MILESTONE FIRST DEADLINE Implementation Date 1 January 2019 Balance Sheet Comparables 1 January 2018 Income Statement Comparables 1 January 2017

3 LESSEES CHALLENGES IN MEETING THE DEADLINES During the development of the new lease accounting standards over the past decade, there was plenty of analysis and debate about how the new standards would impact lease vs. buy decisions and change credit ratings. However, nobody thought much about the additional administrative burdens companies would face in redesigning their lease accounting processes. To avoid a significant deficiency or material weakness, companies will need to adopt new strategies, policies and software in order to maintain complete, accurate and up-to-date lease information. Unfortunately, many companies are woefully unprepared for these requirements even with the first new lease accounting standard deadline less than one year away. Here s the problem: Many global companies that lease equipment all over the world use spreadsheets and to track their leases and assets. However, most corporate finance executives know that spreadsheets alone are not enough to meet the new lease accounting standards compliance requirements. Instead, fiduciaries will need to adopt a scalable, enterprise software solution to ensure the accuracy and completeness of their accounting and public reporting. Most importantly, they need to do so well in advance of the 2019 implementation date in order to provide comparable statements for several prior years, as required by the SEC.

4 THE SOLUTION: LeaseAccelerator LeaseAccelerator, a suite of lease accounting software services designed specifically for equipment lessees, is the best solution for helping companies with large operating lease obligations meet the challenges posed by the new lease accounting standards. BEST Solution to meet new lease standard UP TO 12% savings at the end of the lease term There is no other solution on the market that will enable lessees to meet the new lease accounting standard deadlines while sustaining the processes, controls, accuracy and completeness of data across the enterprise. In addition, lessees can save up to 7 percent on lease sourcing and from 10 percent to 12 percent at the end of the lease term by using LeaseAccelerator.

5 THE DIFFERENCE BETWEEN EQUIPMENT AND REAL ESTATE LEASES LESSEE EQUIPMENT Equipment Lease Management Software-as-a-Service (SaaS) REAL ESTATE Integrated Workplace Management Software (IWMS) LESSOR Installed, On-Premises Installed, On-Premises LeaseAccelerator is designed specifically to manage lease accounting information at the asset level across the enterprise, unlike real estate lease management software platforms or spreadsheet-based transition tools offered by consulting firms. Asset-level information changes on a daily basis but these changes are often known by just a handful of geographically distributed stakeholders. With LeaseAcclerator, you can capture these changes with powerful asset-level notification and attestation tools that are methodically deployed to each stakeholder in your leasing process. Using these tools enables you to manage any midterm or end-of-term event over the term of a lease. This includes capturing any asset-level scenario including partial buyouts, renewals and returns on the same schedule. With this asset-level database, you can apply different economic lives, depreciation and amortization for each asset on a schedule as required, which is critical to meeting the requirements of the new lease accounting standard. You can also manage any asset-level changes in location or business coding. In addition, LeaseAccelerator makes it easy to manage changes in personnel and update your corporate hierarchy at any time. These capabilities are simply not possible with traditional real estate lease management software or a static spreadsheet-based tool. Real estate lease management software is focused on the management of building leases by just a couple of people in a real estate department. Managing building leases requires a significantly different workflow, tools and underlying data model than managing equipment leases. And while spreadsheetbased transition tools may provide a mechanism for capturing data, they can t be deployed in a production environment as an integrated lease accounting subledger to manage a leasing program. This is because they can t scale and are limited to a single purpose (the transition itself).

6 EQUIPMENT VS. REAL ESTATE LEASES EQUIPMENT REAL ESTATE Dollar Value 35% Dollar Value 65% Number of Leases 95% Number of Leases 5% LeaseAccelerator enables you to manage and maintain the accuracy and completeness of millions of rows of leasing data by thousands of stakeholders around the world. This is the core capability required for consistently generating accurate accounting and financial reporting for an equipment lease portfolio. The asset-level tools and capabilities of LeaseAccelerator make it easy to reconcile your portfolio step-by-step at the asset level on a monthly basis and produce auditable financial statements with data that you trust under both the current lease accounting standard and the expected new standard. By adopting LeaseAccelerator, you can remove the uncertainty of transitioning to the new lease accounting standard and continue to use equipment leasing as a strategic tool for your business. With LeaseAccelerator, you can: Prompt and inform your stakeholders Improve return performance Optimize the economics of your portfolio Quantitatively measure the savings and other benefits of leasing. During the transition period to the new lease accounting standard, you can provide management with the tools needed to understand the financial impact of the changes in their financial reporting (statements and ratios).

7 Procurement Applications Purchase Request Purchase Order Cost Center Governance STRAIGHT THROUGH PROCESSING Equipment Leasing Data Asset Management Upgrades Moves Adds Changes End of Term Returns Buyouts Renewals ERP Applications Journal Entries Amounts Due Allocations Corporate Hierarchy General Ledger Codes Cash Disbursement Info Lessor Accounting Systems Moves Adds Changes End of Term Origination Data & Documents IMPROVE LEASE PORTFOLIO MANAGEMENT USING AUTOMATED NOTIFICATIONS Lessors earn a substantial portion of their profits at the end of the lease term when lessees miss their notice requirements, fail to return the equipment on time, continue to pay monthly invoices beyond the term, buyout the lease for more than the fair market value, or extend the lease. LeaseAccelerator s portfolio management capabilities are designed to prevent these cost leakages unless the authorized stakeholder explicitly decides not to return the equipment. With LeaseAccelerator, you can easily capture your end-of-term (EOT) options from the lease and then configure automated notifications to ensure that the appropriate stakeholders are notified before the EOT. You can manage the frequency of the notifications and the economic analysis of the EOT options provided with notifications. The reporting enables you to manage all of the assets and stakeholders and their EOT decisions and follow-through status so you can focus on managing the exceptions.

8 1 2 Competitive Sourcing Contracting & Booking Lease Versus Buy Analysis RFP Preparation & Distribution Analysis of Pricing & Terms Capturing Schedule and asset data Abstracting end of term options Loading Data and Documents 6 Reporting & Analytics Public financial reporting Portfolio & asset-level reporting Internal controls reporting LIFECYCLE OF AN EQUIPMENT LEASE 3 Portfolio Management Tracking leases, assets, users, lessors Capturing movers, adds, changes Monthly reconciliation with each lessor 5 Lease Accounting Monthly close integrated with ERP AP & General Ledger reconciliation Roll forward reporting 4 End of Term Management End of Term notifications Return, refresh, renew, buyout decision Stakeholder scorecards In addition, you can provide stakeholders with details about their performance and its economic impacts on the company (these are called Stakeholder Scorecards ) so they can change their behavior in order to save the company money. The result: Your firm will improve its return performance and generate substantial savings in the process typically from 10 percent to 12 percent or more of your annual leasing volume. LeaseAccelerator also helps you standardize, document and communicate corporate policy, which helps you enforce compliance procedures for your equipment leasing process. It provides complete traceability of all people, events, documents, data and communications for every transaction. LeaseAccelerator s portfolio management and lease accounting features help you improve your adherence to:» Master Lease Agreements» FASB/GAAP» International standards such as CICA/IASB/IFRS» Sarbanes-Oxley» SEC» SOX COSO The result: You and your stakeholders (both internal and external) get complete and accurate data you can trust data that is reconciled to the documents and fully auditable.

9 The Best Lease Accounting Solution for Equipment Lessees LeaseAccelerator has been in continuous development supporting Fortune 500 global equipment lessees since 2009, and it includes access to The Global Lessor Network (GLN), standardized lease contracts, expert support and outsourcing services. It offers lease accounting features that make it easy for equipment lessees to transition to the new lease accounting standard. This includes generating financial reporting for both the current and new lease accounting standards side-by-side throughout the transition process. LeaseAccelerator is used today by a wide range of global companies to manage, control and account for their equipment leasing processes and portfolio. These companies include large manufacturers and high-tech firms such as Allegheny Technologies, Cisco, Cummins, Eaton, NetApp and Salesforce.com. LeaseAccelerator makes it easy for you to manage the lifecycle of leases, assets and lessors. You can: Centralize all documents and data Control your processes of sourcing lease capital and booking transactions Track changes during the lease term Manage end-of-term at the asset level LeaseAccelerator includes highly configurable workflow and tools for lease vs. buy analysis, portfolio management, stakeholder performance management, accounting, and financial reporting. It also integrates with procurement systems (including iprocurement and Ariba) and ERP applications (including SAP and Oracle) and serves as a lease accounting sub-ledger, generating debits and credits at the asset, schedule and portfolio levels. To learn more about how LeaseAccelerator can help your company improve lease portfolio management and meet the challenges posed by the new lease accounting standards, visit