Overview
Lease accounting software measures lease liabilities and right-of-use assets, maintains the schedules, recalculates them when a lease changes, and produces the journal entries and quantitative disclosures required by the relevant standards.
The decision is often driven by remeasurement frequency rather than lease count alone. Initial measurement is arithmetic that every system performs correctly. Systems separate on what happens when a lease changes: an index-linked payment increases, a term is reassessed, or a lease is modified. At that point the schedule must be rebuilt from the effective date and the superseded version retained, and that is where portfolios fall out of agreement with the accounting records.
When a spreadsheet is enough
A spreadsheet is a reasonable answer where all of the following hold:
- Fewer than about five leases.
- Fixed payments, with no index-linked or market-rate escalation.
- No extension, termination or purchase options that are reasonably certain to be exercised.
- No foreign currency leases.
- One reporting entity.
Under those conditions the schedule is built once and runs to expiry. The cost of software exceeds the cost of maintaining the file.
The position changes when any input becomes variable. Each remeasurement requires the schedule to be rebuilt from the remeasurement date at a revised discount rate, while the superseded schedule is retained as evidence. A spreadsheet does not enforce that, and reconstructing the sequence of revisions two years later is the point at which portfolios fail audit.
A narrower option first
Short-term and low-value leases may be exempted under IFRS 16 and recognised on a straight-line basis. Applying the exemptions consistently can remove a material part of a small portfolio from measurement altogether. See short-term and low-value leases.
Where spreadsheets fail
The failure points are specific and predictable.
Remeasurement for index-linked payments. A change in an index or rate used to determine lease payments requires the lease liability to be remeasured using the revised payments, discounted at the original rate. A change in the lease term or in the assessment of a purchase option requires a revised discount rate. Applying the wrong rate is the most frequent measurement error in maintained spreadsheets. See variable lease payments.
Modification against separate lease. A modification that adds a right of use at a price commensurate with its stand-alone price is accounted for as a separate lease; otherwise the existing liability and right-of-use asset are adjusted. The two treatments produce materially different balances. See lease modifications.
Term reassessment. The lease term is reassessed on the occurrence of a significant event within the lessee's control. Spreadsheets generally record the term at inception and are not revisited. See lease term.
Partial termination. A reduction in scope requires the right-of-use asset and lease liability to be decreased on a proportionate basis, with the difference recognised in profit or loss. See lease terminations.
Disclosure aggregation. The maturity analysis of lease liabilities, depreciation by class of underlying asset and total cash outflow for leases must be aggregated across the portfolio at each reporting date. See IFRS 16 disclosures.
Deferred tax. Recognising the right-of-use asset and lease liability gives rise to temporary differences that are tracked separately from the lease schedules themselves. See deferred tax on leases.
Five calculations to test
Every vendor offers a demonstration or a trial. A demonstration shows a prepared portfolio. A trial allows the following to be entered, which is a more reliable test. Each can be completed in under an hour and each separates capable systems from basic ones.
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A mid-term modification. Enter a five-year lease, then extend it by two years in year three. Confirm that the system applies a revised discount rate at the effective date, adjusts the right-of-use asset against the liability rather than through profit or loss, and retains the original schedule.
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An index-linked increase. Apply an escalation in year two. Confirm the original discount rate is retained, and that the system does not require the lease to be re-entered.
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A partial termination. Reduce the leased area by half. Confirm the proportionate reduction in both the right-of-use asset and the lease liability, and the gain or loss recognised.
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A foreign currency lease. The lease liability is a monetary item retranslated at closing rate; the right-of-use asset is non-monetary and remains at historical rate. Confirm the system treats the two differently. See foreign currency leases.
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An opening balance migration. Enter one existing lease mid-term with its current carrying amounts. Confirm the right-of-use asset, lease liability and accumulated depreciation agree to the last signed financial statements. If migration only works from lease commencement, every existing lease must be rebuilt from inception.
What it costs
Systems aimed at portfolios below roughly twenty leases are sold self-serve, with published pricing from around $99 per month and a free trial. Above that threshold most of the category prices by quotation, driven by lease count, number of reporting entities, required integrations and the scope of implementation.
The subscription is rarely the whole cost. Establish each of the following before setting one quotation against another.
| Cost component | What to establish |
|---|---|
| Subscription tier | Whether the limit is leases, users or reporting entities, and the cost of exceeding it |
| Implementation and migration | Whether opening balances are migrated within the price or billed as a separate project |
| Training | Whether it is included, and whether it extends to staff who join later |
| Additional entities | Whether each reporting entity consumes a tier or is charged separately |
| Integration | Whether the connection to the general ledger is standard or a separate build |
| Exit | Whether lease data and superseded schedules can be exported on termination |
Where a trial is offered it is the cheapest way to settle most of these, because the five tests above can be run before any commercial discussion begins.
What features to look out for
The calculations above test how a system behaves. The following are matters of scope and control, which are established by inspection rather than by computation, and which are the usual reasons a system is outgrown within two reporting periods.
| Feature | What to confirm |
|---|---|
| Standards covered | Whether IFRS 16 and ASC 842 are both supported, and whether any entity in the group also reports under GASB 87, GASB 96 or FRS 102 |
| Lessor as well as lessee | Whether classification is supported and the net investment measured at the interest rate implicit in the lease. Many systems are lessee-only, or place lessor accounting at a higher tier |
| Recognition exemptions | Whether short-term and low-value leases are recognised on a straight-line basis inside the system, rather than tracked separately outside it |
| Discount rates | Whether an incremental borrowing rate is held per lease, and which rate the system applies on each category of remeasurement |
| Journal entries | Whether journals map to your own chart of accounts and export in a format the general ledger accepts |
| Disclosures | Whether the maturity analysis of lease liabilities, depreciation by class of underlying asset, interest on lease liabilities and total cash outflow for leases are generated, or assembled by hand afterwards |
| Audit trail | Whether a changed input is traceable to the person and the date, and whether that record can be exported for the auditor |
| Period control | Whether a reporting period can be locked once signed off, so that a later entry cannot move a balance already reported |
| Multiple entities | Whether each reporting entity is maintained separately, and whether intragroup leases are eliminated and consolidated journals produced |
| Access control | Whether permissions are role-based, so that sensitive operations can be restricted, and whether users are charged per seat |
Where Leash fits
Leash was built against the feature list above rather than around a single lease type.
Both standards, and every position under them. IFRS 16 and ASC 842 are supported for lessee leases, lessor finance and sales-type leases, lessor operating leases, and leases held under the short-term and low-value exemptions. Modifications and remeasurements are supported on each of them, not only on the lessee side, so a lessor portfolio does not have to be maintained separately.
The disclosures as an output, not an exercise. The maturity analysis of lease liabilities, depreciation by class of underlying asset, interest on lease liabilities and total cash outflow for leases are generated from the portfolio. Classes of underlying asset are defined by the company, so the analysis follows the classes already used in the financial statements.
Controls that hold up at audit. A reporting period is locked once signed off, recording who locked it and when, and entries dated into a locked period are rejected. Access is role-based, so sensitive operations can be restricted to senior staff, and users are unlimited on every tier rather than charged per seat.
Groups, not only single entities. Balances aggregate from lease to company to group. Intragroup leases are eliminated and consolidated journals are produced at group level, with group reporting periods locked in the same way, so a consolidation does not have to be assembled outside the system.
Implementation is done for you. Existing leases are migrated with their opening balances, so that the right-of-use asset, lease liability and accumulated depreciation carried into the system agree to the last signed financial statements. No payment is taken until onboarding is complete and accepted.
Two limitations are worth stating. Leash covers IFRS 16 and ASC 842 only, so an entity also reporting under GASB or FRS 102 needs wider coverage. It does not extract lease terms automatically from lease documents; terms are entered or imported.
Comparing lease accounting systems?
Leash automates lease schedules, journal entries, and IFRS 16 and ASC 842 compliance, so you're not rebuilding this in Excel every month-end.
Conclusion
The decision turns on remeasurement frequency rather than lease count alone. A static portfolio is maintainable in a spreadsheet; a portfolio with index-linked payments, options or modifications is not, and the point of failure is the audit trail rather than the arithmetic. Test a modification and an opening balance migration before committing, and establish what the quoted price includes.
For clarification, guidance, or feedback on our article, please reach out to us at insight@leash.co.za.