SAP Contract and Lease Management – FAQ

SAP Contract and Lease Management – FAQ

Yes CLM provides both standard accounting reports which shows all your reporting requirements as well ad hoc reporting. The Bramasol disclosure package adds in the necessary disclosure data points in the 10k/10 q format that are recommended by the FASB for ASC 842 compliance.

Yes, CLM provides robust audit trails of every activity and transaction done within the system. There is also strong security settings and the ability to assign privileges by role and is enhanced through standard workflow to help to ensure compliance with SOD and ICFR

PWC did an independent review of CLM and has issued a report giving the assurance that when properly configured, CLM will provide the correct calculations for appropriate aspects of lease accounting and make the appropriate accounting journal entries for ASC 842 and IFRS 16.

Yes, CLM is part the SAP core. SAP is a Fortune 500 dual listed software company.

Yes CLM can manage real estate, equipment and other leased assets.

Yes, as part of the offerings, there is a Cloud for Real Estate product.

For customers who are current on their SAP Support, SAP provides updates to key components on a regular basis that are free of charge including bug fixes, features and added functionality, (Including revisions and interpretations of FASB and IASB).

Yes CLM is part of the SAP ERP core so there is seamless integration so you don’t have to worry about maintaining APIs or interfaces when SAP upgrades or improves the REFX product.

Many normal day-to-day leasing activities will trigger a change to the FASB schedule. Activities like accepting tenant improvement money, renewing an option, changes in rent or space, all require a change to the schedule along with the offsetting transactions. CLM can easily handle and recognize these triggers and create a recalculated schedule in real time.

Under the new FASB guidelines all leases will need to be classified as “Finance” or “Operating.” (Under IASB all leases will be considered finance.) There are a set of general rules that determine which classification is appropriate for each lease. In 2020, that was added to the new functionality.

As one major retail client of ours said, “I can’t afford to get this even 1% wrong.” While the screens that you see in a lease accounting solution aren’t terribly complex (at least they shouldn’t be) the calculations that happen behind the scenes are extremely complicated. That’s why you want to insist on a solution with vetted calculations. Better yet, if the system is recommended by some of the big accounting firms.

Trust us, once you get all of your lease data into a system, get it integrated with your general ledger, train your staff, and start managing your leases, you won’t want to have to move to another system because the vendor left the market or was unable to deliver on their promises. Choose a provider with a long, proven track record of stability.

The standards weren’t finalized until last year and even since then there is an ongoing discussion about the nuances of how the calculations will be performed, so it isn’t surprising or worrisome if the vendor says that their product continues to evolve. That’s a good thing. But you don’t want to go with a vendor that can’t demonstrate the functionality or that hasn’t actively started implementing clients. The outline of the standards has been around for almost 10 years, so find a partner that’s been working on their solution for years, not months.

Keep in mind that the new reporting mandate covers more than just real estate leases. Equipment leases, embedded leases and other types of contracts are covered as well. For reporting, management, and accuracy purposes, it makes sense to find one solution that can handle all contract types.

Lease accounting is about to get a lot more attention from auditors, regulators, investors, and lenders. You should only consider solutions with strong security settings and the ability to assign privileges by role. What’s more, there should be an audit trail for material data changes and events.

The ability to report on the financial activity related to leases is essential. Look for a solution that has the standard reports you would expect to find along with the ability to create custom reports that match your specific needs.

This is a big job for most organizations. Some will prefer to do most of the heavy lifting themselves, while others will rely on a partner with the resources and experience to help with things like lease audits, abstraction, implementation, and ongoing maintenance. Even if you don’t think you’ll need much in the way of professional services now, it’s smart to pick a partner that can provide them should you want assistance in the future.

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