Axiom releases system for identifying embedded leases in contracts
Axiom, a provider of legal contract technology, has introduced the Contracts Intelligence Platform for Lease Accounting to help organizations uncover embedded leases that are subject to the new lease accounting standard.
The ASC 842 leasing standard from the Financial Accounting Standards Board is set to take effect in December 2018 for public companies and in December 2019 for private companies, while the international version of the standard, IFRS 16, is set to take effect in January 2019 for public companies. The two versions of the standard differ somewhat despite years of effort in converging them together, but both standards will add operating leases to the balance sheet of many companies for the first time. However, many companies are still struggling to get ready for the new standards, especially after the revenue recognition standard just took effect several months ago. One of the problems is tracking down all of their leases that may be hidden inside contracts, known as embedded leases.
Axiom’ Contracts Intelligence Platform for Lease Accounting is designed to uncover embedded leases hidden in other contract types, ensure they’re categorized appropriately, and provide information to understand the nature of the embedded lease and its impact on the balance sheet.
“One of the critical areas of the new lease accounting standards is not just abstracting 'traditional leases' like real estate, but it is understanding what is now considered a ‘lease,’” said Mathew Keshav Lewis, senior vice president of regulatory response solutions at Axiom, in a statement. “The new standards have expanded that definition substantially, to include a much broader set of commercial arrangements. As a result, organizations will need to identify and understand the data that is held in, potentially, thousands of contracts across a variety of different uses — manufacturing equipment, servers etc. — to ensure they are accurately reporting on all of the lease elements."
For more information, visit www.axiomlaw.com.