Lease accounting software should do more than calculate present value. Finance teams need a controlled contract-to-ledger process that remains reliable when payment terms change, leases are modified, entities close at different times and auditors ask how a number was produced.
Use these ten capabilities to evaluate a new system or diagnose gaps in an existing one.
1. Central lease register and contract abstraction
The system should maintain one governed record for each lease, including asset, entity, location, counterparty, commencement, term, payment schedule, indexation, options, incentives, deposits and restoration obligations.
Contract fields should support documents or source references, effective dating and review status. A register is valuable only when users can see which terms were extracted, who reviewed them and what changed.
Demo test: amend one contract field and show its history, approval and calculation impact.
2. Flexible payment and calculation engine
Real contracts contain monthly, quarterly, annual, stepped, rent-free, advance and arrears payments. The engine should handle timing, fixed and qualifying variable payments, incentives, initial direct costs and relevant restoration amounts without manual schedule rebuilding.
Calculations should cover initial and subsequent measurement, effective interest, ROU depreciation and rounding. Users need an account-level schedule they can independently inspect.
Demo test: model a stepped quarterly lease with an incentive and reconcile the opening liability manually.
3. Discount-rate governance
The platform should apply approved discount rates using relevant characteristics such as currency, term, entity, geography, asset class or credit profile according to the organisation's methodology.
Rates need effective dates, source, preparer, reviewer and locked history. The system should prevent a later rate update from rewriting prior-period schedules unintentionally.
Demo test: show which rate was used for a single lease, why it was selected and who approved it.
4. Modification, reassessment and termination workflows
The hardest lease accounting often occurs after commencement. Software should support remeasurement for changed terms, index/rate changes, option reassessment, partial termination, scope increase and early termination.
The workflow should guide the user through event classification, applicable effective date, discount-rate treatment and accounting result. Before-and-after schedules and approval evidence are essential.
Demo test: process a partial floor surrender and show the liability reduction, ROU reduction and gain or loss.
5. Journal generation and posting control
The system should generate commencement, interest, payment, depreciation, remeasurement, modification, impairment and close-out entries at the required frequency.
Journal rules should map to entity ledgers, cost centres, asset classes and currencies. A maker-checker process should separate journal preparation, review, export and posting. Posted entries must be traceable to the approved lease schedule.
Demo test: trace one general-ledger line back to the lease, calculation period and approval.
6. Disclosure and roll-forward reporting
Look beyond a generic dashboard. The platform should support ROU additions and depreciation, lease liability maturity analysis, finance cost, short-term and low-value expense where relevant, cash outflow information and other required disclosure inputs.
Reports should reconcile to the ledger and retain prior-period comparatives. Users should be able to drill from summary to contract rather than exporting multiple uncontrolled spreadsheets.
Demo test: reconcile a disclosure total to the approved close and underlying contracts.
7. Reconciliation and exception management
Software should compare contract schedules, invoices or payment data, subledger outputs and the general ledger. Missing payments, changed bank amounts, expired leases, negative balances and out-of-sequence events should appear as owned exceptions.
An exception workflow should capture status, commentary, evidence and approval. Simply displaying a variance is not the same as controlling it.
Demo test: upload a payment file containing a missing and duplicate payment and show how both are resolved.
8. Multi-entity, multi-currency and close management
Groups need entity-level calendars, chart-of-account mappings, currencies, local adjustments and consolidation outputs. Role access should ensure that local teams see and change only their authorised populations while group finance retains oversight.
Foreign-currency functionality should distinguish contractual cash-flow currency, measurement currency, exchange-rate source and translation output as applicable.
Demo test: run two entities with different currencies and close dates, then produce a consolidated status view.
9. Integration and data portability
Evaluate connections with ERP, accounts payable, procurement, contract management, property systems and identity services. APIs and scheduled interfaces can reduce repeated manual upload, but they also need reconciliation and monitoring.
The system should provide usable exports of contracts, schedules, journals, documents and audit history. Data portability matters for assurance, analytics and eventual system exit.
Demo test: export a complete lease record and reload a corrected source transaction without duplicating the contract.
10. Access control, audit trail and resilience
Role-based access should distinguish contract entry, review, rate maintenance, event approval, journal approval and administration. Audit logs should record before-and-after values, user and timestamp and should not be editable by ordinary users.
Also review encryption, backup, recovery, monitoring, vulnerability management, data residency and incident response according to organisational policy.
Demo test: attempt an unauthorised rate change, restore a prior version and export the audit trail.
Suggested feature scorecard
| Area | Weight | Score (0–5) | Weighted result |
|---|---|---|---|
| Contract coverage and calculations | 25% | ||
| Events and modifications | 20% | ||
| Journals, reconciliation and close | 20% | ||
| Reporting and disclosures | 15% | ||
| Integration and group support | 10% | ||
| Controls, security and resilience | 10% |
Do not score from slideware. Use representative contracts, including at least one modification, one exception and one disclosure trace.
Red flags when choosing a platform
- Calculations cannot be traced below summary level.
- Modifications require deleting and recreating the lease.
- Discount rates can be changed without effective dating or approval.
- Journals and disclosures come from separate manual workbooks.
- The audit trail records the latest value but not the previous value.
- Bulk upload has no duplicate or completeness control.
- Data export excludes calculation history or attached evidence.
- Implementation scope ignores contract collection and data cleansing.
Frequently asked questions
Is a contract-management system enough for Ind AS 116?
Not necessarily. Contract systems may capture terms and reminders without performing accounting measurement, journal, remeasurement, disclosure and audit-trail functions. Integration can be useful, but responsibilities must be clear.
Should small lease portfolios use software?
The answer depends on volume, complexity, modification frequency, entity structure and control risk. A small but complex portfolio may justify a controlled tool, while a very simple portfolio may be managed proportionately with well-controlled schedules.
What data should be cleaned before implementation?
At minimum: unique contract identifiers, entity, dates, payment schedules, options, incentives, deposits, discount-rate attributes, modification history and ledger mappings. Implementation should reconcile the opening liability and ROU asset before go-live.
Evaluate the full close process
Explore Lease Accounting Services or talk to an expert about contract abstraction, calculations, modifications and reporting controls.
Technical references
- Ministry of Corporate Affairs, Ind AS 116—Leases