The regulatory landscape is shifting with standards like IFRS 16, FRS 102, and ASC 842 redefining lease accounting, elevating it from a transactional obligation to a board-level concern. For finance leaders, the challenge is no longer just technical compliance. It’s ensuring accuracy, audit readiness, and strategic visibility without relying on legacy tools – like spreadsheets – that weren’t built for the job.
Despite this, many organisations still manage lease data in spreadsheets. But in today’s environment, this isn’t enough. Spreadsheets are exposing businesses to risk, reducing operational agility, and adding avoidable audit pressure at a time when scrutiny is only increasing.
The regulatory bar has been raised
Under FRS 102, operating and finance lease classifications require detailed disclosures, with rules that differ by sector. IFRS 16 shifts most leases onto the balance sheet and requires updates when assumptions like lease terms or rates change. ASC 842 further complicates matters for UK-based companies with US operations or investors.
Finance teams must now present a complete and transparent view of lease obligations—how they impact the income statement, the balance sheet, and long-term financial planning. And they need to do it at pace, with precision, and under pressure.
Why Spreadsheets Are No Longer Fit for Purpose
Finance professionals know the limitations all too well: version control issues, manual formula errors, scattered documentation, and audit trails that disappear the moment key staff move on. When lease portfolios span hundreds or thousands of assets—from real estate to fleet to equipment—those limitations quickly escalate into liabilities.
In 2023, Vanquis Banking Group, formerly Provident Financial, disclosed £52 million in accounting errors, requiring a restatement of prior-year financials. While the primary issues related to loan impairments, the case highlights the broader danger of inadequate financial controls and overreliance on manual processes—especially in areas like lease accounting where regulation continues to evolve and complexity is high.
The lesson is clear: when systems can’t keep up, even minor missteps can have major consequences.
What Today’s Finance Function Needs
To meet the demands of evolving standards and rising expectations, finance teams need more than a workaround. They need systems designed for this purpose—systems that:
- Deliver end-to-end audit transparency
- Automate remeasurements and disclosures
- Integrate directly with ERP platforms
- Scale across asset classes and global portfolios
- Provide instant access to reporting and board-level insights
- The result is not just compliance. It’s control. It’s speed. It’s strategic clarity.
A Tipping Point for Mid-Market Firms
While larger enterprises have long embraced automation, mid-sized UK firms, often managing lean teams with stretched resources, are now leading the charge. The reasons are clear: tighter audit deadlines, increasing investor scrutiny, and a need for efficiency in every corner of finance operations.
Lease accounting has become a prime candidate for digital transformation, not only because of its complexity, but because the benefits of automation are immediate and measurable.
The Bottom Line
Finance leaders know that risk compounds in silence. And few tools have hidden risk as quietly, and for as long, as spreadsheets. Lease accounting has evolved, and so must the systems that support it.
Now is the time to reassess and modernise as the regulatory landscape continues to evolve.
In an era of rising standards and accelerating expectations, resilience isn’t just about surviving audits, it’s about building a finance function that’s ready for tomorrow.
Authored by Gavin Maze, Sales Director for EMEA Occupier & Workplace Solutions at MRI Software.