{"id":3746,"date":"2020-12-15T16:16:10","date_gmt":"2020-12-15T20:16:10","guid":{"rendered":"https:\/\/visuallease.com\/?p=3746"},"modified":"2024-06-26T11:58:37","modified_gmt":"2024-06-26T15:58:37","slug":"why-roll-forward-reports-are-essential-for-lease-accounting","status":"publish","type":"post","link":"https:\/\/visuallease.com\/why-roll-forward-reports-are-essential-for-lease-accounting\/","title":{"rendered":"Why roll-forward reports are essential for lease accounting"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/visuallease.com\/why-roll-forward-reports-are-essential-for-lease-accounting\/#What_is_a_roll-forward_report\" >What is a roll-forward report?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/visuallease.com\/why-roll-forward-reports-are-essential-for-lease-accounting\/#The_importance_of_roll-forward_reports\" >The importance of roll-forward reports<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/visuallease.com\/why-roll-forward-reports-are-essential-for-lease-accounting\/#Roll-Forward_Reports_Meeting_Lease_Accounting_Standards\" >Roll-Forward Reports: Meeting Lease Accounting Standards<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/visuallease.com\/why-roll-forward-reports-are-essential-for-lease-accounting\/#The_advantages_of_roll-forward_reports\" >The advantages of roll-forward reports<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/visuallease.com\/why-roll-forward-reports-are-essential-for-lease-accounting\/#Creating_Comprehensive_Roll-Forward_Reports\" >Creating Comprehensive Roll-Forward Reports<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/visuallease.com\/why-roll-forward-reports-are-essential-for-lease-accounting\/#1_Data_Accuracy\" >1. Data Accuracy<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/visuallease.com\/why-roll-forward-reports-are-essential-for-lease-accounting\/#2_Multiple_Data_Sources_and_Locations\" >2. Multiple Data Sources and Locations<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/visuallease.com\/why-roll-forward-reports-are-essential-for-lease-accounting\/#3_Tailoring_Reports_to_Fit_Your_Needs\" >3. Tailoring Reports to Fit Your Needs<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/visuallease.com\/why-roll-forward-reports-are-essential-for-lease-accounting\/#4_Elements_of_an_Informative_Roll-Forward_Report\" >4. Elements of an Informative Roll-Forward Report<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/visuallease.com\/why-roll-forward-reports-are-essential-for-lease-accounting\/#5_Transaction_Classification\" >5. Transaction Classification<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/visuallease.com\/why-roll-forward-reports-are-essential-for-lease-accounting\/#Why_use_roll-forward_reports\" >Why use roll-forward reports?<\/a><\/li><\/ul><\/nav><\/div>\n<p><img decoding=\"async\" class=\"wp-image-3744 aligncenter\" src=\"https:\/\/visuallease.com\/wp-content\/uploads\/2020\/12\/How-to-get-actionable-insight-300x175.png\" alt=\"\" width=\"872\" height=\"508\" srcset=\"https:\/\/visuallease.com\/wp-content\/uploads\/2020\/12\/How-to-get-actionable-insight-300x175.png 300w, https:\/\/visuallease.com\/wp-content\/uploads\/2020\/12\/How-to-get-actionable-insight-1024x597.png 1024w, https:\/\/visuallease.com\/wp-content\/uploads\/2020\/12\/How-to-get-actionable-insight-768x448.png 768w, https:\/\/visuallease.com\/wp-content\/uploads\/2020\/12\/How-to-get-actionable-insight.png 1200w\" sizes=\"(max-width: 872px) 100vw, 872px\" \/><\/p>\n<p>&nbsp;<\/p>\n<p><!--Table of Contents\n\n\n<ul>\n\n\n<li><a href=\"#what\">What is a roll-forward report?<\/a><\/li>\n\n\n\n\n<li><a href=\"#importance\">The importance of roll-forward reports<\/a><\/li>\n\n\n\n\n<li><a href=\"#meeting\">Roll-Forward Reports: Meeting Lease Accounting Standards<\/a><\/li>\n\n\n\n\n<li><a href=\"#advantages\">The advantages of roll-forward reports<\/a><\/li>\n\n\n\n\n<li><a href=\"#creating\">Creating Comprehensive Roll-Forward Reports<\/a><\/li>\n\n\n\n\n<li><a href=\"#why\">Why use roll-forward reports?<\/a><\/li>\n\n\n<\/ul>\n\n --><\/p>\n<p>The new lease accounting standards include a variety of <a href=\"https:\/\/visuallease.com\/lease-accounting-disclosures-6-tips-for-successful-asc-842-reporting\/\" target=\"_blank\" rel=\"noopener\">disclosure reports <\/a>to give financial auditors visibility into an organization\u2019s leasing activities. Although the standards do not explicitly mention roll-forward reporting, they do require companies to <b>explain changes to leases on the balance sheet <\/b>disclosing not only amounts gained or lost, but also <i>why <\/i>those gains or losses occurred.  <\/p>\n<h2 id=\"what\"><span class=\"ez-toc-section\" id=\"What_is_a_roll-forward_report\"><\/span><b>What is a roll-forward report?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><b>Roll-forward reports <\/b>are a valuable tool for meeting this lease accounting requirement. They provide a detailed explanation of lease financials including period over period changes to right-of-use (ROU) assets, as well as short-term and long-term liabilities.<br \/>\n<b>What makes roll-forward reports so valuable for lease accounting and compliance?<\/b><\/p>\n<h2 id=\"importance\"><span class=\"ez-toc-section\" id=\"The_importance_of_roll-forward_reports\"><\/span><b>The importance of roll-forward reports<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>If lease activity remained the same over time ,it would besimple to show amortization of ROU assets and liabilities , with schedules specifying asset and liability reductions in each period.  <\/p>\n<p>The challenge is that ,in reality, a company\u2019s leases and liabilities are always changing due to events such as:  <\/p>\n<ul>\n<li>New leases or transitions <\/li>\n<li>Modifications <\/li>\n<li>Impairments <\/li>\n<li>Terminations<\/li>\n<li>Regular amortization<\/li>\n<\/ul>\n<h2 id=\"meeting\"><span class=\"ez-toc-section\" id=\"Roll-Forward_Reports_Meeting_Lease_Accounting_Standards\"><\/span><b>Roll-Forward Reports: Meeting Lease Accounting Standards<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>To comply with the latest lease accounting standards, accounting must accurately and thoroughly report all those changes, including lease additions or subtractions as well as the reasons why those changes occurred.  <\/p>\n<p>Forexample:  <\/p>\n<ul>\n<li>If a company needs to book a loss onan impaired asset ,the lease accounting is required to show the details including the corresponding reduction in the ROU asset. <\/li>\n<li>If a company received rent abatements and decided to treat them as remeasurement events rather than variable rent expenses, the lease accounting must clearly reflect the resulting amounts and how and why the company calculated them.<\/li>\n<\/ul>\n<p><b>Roll-forward reports are an effective method for disclosing these and other changes that occur in the life of company\u2019s leases.<\/b> <\/p>\n<h2 id=\"advantages\"><span class=\"ez-toc-section\" id=\"The_advantages_of_roll-forward_reports\"><\/span><b>The advantages of roll-forward reports<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Theroll-forwardreport ingconcept issimilar toa statement of cash flows, which reconcile the differences between the cash position on the balance sheet and on the P&amp;L statement.  <\/p>\n<p>A roll-forward report does the same thing, but forleases\u2014provid inga window into an organization\u2019s lease portfolio, activities and business decisions, including why there are additions or subtractions in lease financials. For instance, a report may show a large change in liability but also reveal it is offset by additional lease assets.  <\/p>\n<p>In addition, r oll-forward report sare a vehicle for separating finance lease s fromoperating leasesas required forASC 842compliance. The reports can also segregate and report lease information according to asset classes.  <\/p>\n<h2 id=\"creating\"><span class=\"ez-toc-section\" id=\"Creating_Comprehensive_Roll-Forward_Reports\"><\/span><b>Creating Comprehensive Roll-Forward Reports<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<h3><span class=\"ez-toc-section\" id=\"1_Data_Accuracy\"><\/span>1. Data Accuracy<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Roll-forward reports outline the changes in your balance sheet period over period. Therefore, the first step to a roll-forward report is to ensure your lease information is accurate, up tod ate andc omplete .  <\/p>\n<h3><span class=\"ez-toc-section\" id=\"2_Multiple_Data_Sources_and_Locations\"><\/span>2. Multiple Data Sources and Locations<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Roll-forward reports ofteninclude leaseinformationcollectedfrom multiple sources ,such as the different departments responsible for real estate, office and IT equipment, vehicles and other assets. Data gathering may also involve individual locations in different cities, states, regions or countries.  <\/p>\n<h3><span class=\"ez-toc-section\" id=\"3_Tailoring_Reports_to_Fit_Your_Needs\"><\/span>3. Tailoring Reports to Fit Your Needs<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The information with in roll-forward reports will vary depending on company structure, assets, and accounting and reporting needs. An example, you might create a report for the entire lease portfolio \u2014 or fora single asset, a particular department within the company, a sub-organization within a multi-national corporation or an asset class(such as real estate or equipment).  <\/p>\n<h3><span class=\"ez-toc-section\" id=\"4_Elements_of_an_Informative_Roll-Forward_Report\"><\/span>4. Elements of an Informative Roll-Forward Report<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>To be truly beneficial, the report must explain why changes happened in lease financials, as well as the amounts. Therefore, roll-forward reports for a ROU asset or a short- or long-term liability typically include the following:  <\/p>\n<ul>\n<li>Beginning balance <\/li>\n<li>Additions\u2014including new leases, transitions and modifications <\/li>\n<li>Deductions\u2014including modifications, impairments, terminations and amortizations<\/li>\n<li>Recalculatede ndingb alance\u2014 including the mathematical formula<\/li>\n<li>Ending balance comparison for the period<\/li>\n<li>Total liability balance<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"5_Transaction_Classification\"><\/span>5. Transaction Classification<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The roll-forward report should classify each transaction by asset type and include payments, amortization and interest. Where companies have a classified balance sheet, they should report bothshort-term and long-term liabilities, including monthly reclassifications or, if payments are not monthly, interest accruals.  <\/p>\n<h2 id=\"why\"><span class=\"ez-toc-section\" id=\"Why_use_roll-forward_reports\"><\/span><b>Why use roll-forward reports?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Roll-forward reports are an important tool for both lease accounting compliance and ongoing lease visibility. They enable financial statement users to easily view lease changes, the reasons behind themand their impact, all in one report. <\/p>\n<p>By implementing a technology platform that automates roll-forward reporting, organization scan streamline information gathering, calculations and reporting while ensuring that the process meets compliance requirements. <\/p>\n<p>Visual Lease\u2019s industry-leading lease accounting platform supports roll-forward reporting for better validation and transparency . The platform \u2019s roll-forward report capabilities provide userswithaclearunderstanding of lease changes and how they impact the business . Users may easilyviewall the supporting data and leaseactivity right within the platform. Visual Lease canalsoautomatically separate financeandoperating leases for compliance with ASC 842 .  <\/p>\n<p>To learn more, watch our on-demand webinar <a href=\"http:\/\/engage.visuallease.com\/content\/roll-forward-reports-when-to-do-it-how-to-do-it-and-how-to-automate-it-webinar\">Roll-Forward Reports: When to Do it, How to Do it, and How to Automate It <\/a>.  <\/p>\n","protected":false},"excerpt":{"rendered":"<p>&nbsp; The new lease accounting standards include a variety of disclosure reports to give financial auditors visibility into an organization\u2019s leasing activities. Although the standards do not explicitly mention roll-forward&#8230;<\/p>\n","protected":false},"author":2,"featured_media":3744,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"content-type":"","footnotes":"","_links_to":"","_links_to_target":""},"categories":[170],"tags":[185,210,215],"company_size":[],"company_portfolio_size":[],"company_industry":[],"case_study_topic":[],"class_list":["post-3746","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-lease-accounting","tag-asc-842","tag-fasb","tag-lease-accounting"],"acf":[],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/posts\/3746","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/comments?post=3746"}],"version-history":[{"count":0,"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/posts\/3746\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/media\/3744"}],"wp:attachment":[{"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/media?parent=3746"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/categories?post=3746"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/tags?post=3746"},{"taxonomy":"company_size","embeddable":true,"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/company_size?post=3746"},{"taxonomy":"company_portfolio_size","embeddable":true,"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/company_portfolio_size?post=3746"},{"taxonomy":"company_industry","embeddable":true,"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/company_industry?post=3746"},{"taxonomy":"case_study_topic","embeddable":true,"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/case_study_topic?post=3746"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}