What is lease accounting software?

Before ASC 842 and IFRS 16, operating leases were kept off the balance sheet - which meant analysts could not easily see a company's full debt picture. The new standards changed this. Companies with multiple leases now need software to calculate amortization schedules, generate journal entries, and produce the required disclosures.

The key calculation is the present value of future lease payments, which determines the Right-of-Use asset and lease liability that go on the balance sheet. This calculation changes every time lease terms are modified, a renewal option is exercised, or a new lease is signed. Doing this manually in a spreadsheet is error-prone and auditors have become increasingly focused on the accuracy of these calculations.

LeaseQuery, Lease Accelerator, and Visual Lease are leading specialized lease accounting solutions. They integrate with major ERP systems. For companies with just a few leases, a spreadsheet or a basic accounting tool with manual journal entries may suffice.

The threshold for when dedicated software makes sense is roughly five to ten leases. Below that, a well-maintained spreadsheet with proper amortization schedules and a disciplined journal entry process is manageable. Above that, the risk of errors increases substantially and the time cost of manual maintenance exceeds the cost of a dedicated tool. In Note.now, lease liabilities can be recorded as long-term liabilities and amortised through monthly journal entries for businesses with simple lease portfolios.