Lease accounting today is more complex and demanding than ever, especially for property managers juggling dozens or even hundreds of different lease agreements.
With modern accounting standards like IFRS 16 and ASC 842, nearly all leases must be recognized on the balance sheet, bringing right‑of‑use assets and lease liabilities into core financials and dramatically reshaping financial reporting.
For many organisations, this transition has uncovered hidden risks and triggered an urgent need for stronger systems and tighter controls.
In fact, a global survey found that 55% of companies reported unexpected challenges when implementing IFRS 16, and 72% believed their existing systems lacked the full functionality needed to handle lease accounting requirements.
This landscape is where lease accounting NetSuite shines, enabling property managers to streamline reporting, reduce errors, and comply consistently.
Below, we explore the five most common lease accounting mistakes property managers avoid when they adopt NetSuite for lease accounting along with practical insights and best practices.
1. Manual Data Entry Errors And How NetSuite Eliminates Them
Lease accounting often begins and sometimes ends with massive amounts of data.
Traditional spreadsheets and manual entry processes break down quickly as lease portfolios grow, leading to:
- Typographical mistakes that distort financial figures.
- Lost or misfiled lease terms, causing inaccurate schedules.
- Outdated renewals or payment terms being overlooked.
Without a centralised and automated system, even experienced teams struggle with consistency. This is where lease accounting NetSuite transforms operations.
NetSuite’s real power lies in its ability to centralise all lease information in one system. Once lease data is uploaded, users benefit from:
- Standardised data entry for every lease, reducing variation and errors.
- Automated reconciliation workflows that align lease records with the general ledger.
- Integrated dashboards and real‑time updates that reflect changes instantly.
By eliminating the need for repetitive manual entries, NetSuite dramatically improves accuracy and allows accounting teams to spend more time on analysis rather than data correction.
Once manual data errors are under control, the next challenge property managers face is accurately classifying leases, a critical step for compliant financial reporting.
2. Misclassification Of Leases And The Role Of Lease Accounting NetSuite Solutions
Under modern standards like IFRS 16 and ASC 842, classifying a lease correctly isn’t just technical, it directly affects how liabilities, assets, and expenses are recognised.
For example, historically “off‑balance sheet” operating leases are now typically recognised as both an asset and a liability under current rules.
One of the most frequent errors is misclassifying leases, often because distinctions between operating and finance leases or embedded leases within larger contracts can be subtle and complex.
Misclassification leads to:
- Incorrect liabilities on the balance sheet
- Misstated EBITDA or net profit
- Misleading ratios for investors or lenders
NetSuite’s lease accounting module addresses this by embedding rule‑based classification logic directly into the system.
The software automatically applies criteria from IFRS 16 / ASC 842, guiding users through classification and flagging potential misclassifications before they become reporting issues.
This not only strengthens compliance but also builds confidence in financial results, particularly during audits and stakeholder reviews.
With each lease accurately classified, the next hurdle is performing precise calculations of liabilities and assets and here, automation significantly reduces the risk of misstatements.
3. Inaccurate Calculation Of Lease Liabilities And Assets
After classification, calculating right‑of‑use (ROU) assets and lease liabilities under IFRS 16/ASC 842 can be daunting.
These figures ultimately shape your balance sheet, affect financial ratios, and feed into profit and loss accounts.
Manual spreadsheets struggle with:
- Complex present‑value calculations
- Variable payments tied to indices or rent escalations
- Reassessments due to lease modifications
When handled incorrectly, these calculations distort financial statements and create significant audit risk.
Lease accounting NetSuite automates these processes by:
- Using built‑in amortisation engines to handle present value and interest computations
- Automatically adjusting lease liabilities and ROU assets whenever terms change
- Tagging escalations, CPI increases, and other terms so calculations remain precise
NetSuite rebalances liabilities and assets with every update without the need for repetitive number crunching in Excel.
This reduces errors and ensures that lease values are always accurate and audit‑ready.
Automating calculations puts accounting teams in a much stronger position but many organisations still struggle to manage lease modifications efficiently.
4. Failure To Track Lease Modifications And Terminations
Lease agreements rarely remain static.
Extensions, reductions in space, rent concessions, early terminations, these updates all trigger accounting consequences under IFRS 16 and ASC 842.
Many accounting teams unintentionally:
- Miss modification triggers
- Fail to update lease terms accurately
- Ignore reassessments of lease liabilities
These oversights can lead to significant discrepancies between actual obligations and what is reported.
NetSuite’s solution for lease accounting netsuite recognises that lease contracts evolve.
It automatically:
- Detects lease changes
- Re‑measures affected liabilities and assets
- Records modifications with full audit trails
This dynamic handling ensures that accounting records evolve in real time which is especially valuable at month‑end or during financial reviews.
Tracking modifications effectively also supports another essential requirement: comprehensive documentation and full audit readiness.
5. Poor Documentation And Lack Of Audit Trails
Auditors pay close attention to lease accounting because it involves judgement calls from discount rates to lease term interpretations.
When documentation is patchy or scattered across emails and spreadsheets, it creates risk and slows audits.
Many property managers have faced audit challenges due to:
- Incomplete lease histories
- Missing versions or records
- Undocumented classification decisions
NetSuite solves this by creating a centralised repository of lease documentation and history.
Every change, adjustment, and calculation is tracked with time‑stamped logs, including:
- Original lease documents
- Modification timelines
- Classification rationale
- Automated journal entries
With NetSuite, auditors can view the full lease history at a glance, improving transparency and accelerating compliance reviews.
Conclusion
Effective lease accounting has become a cornerstone of sound financial management and with evolving standards like IFRS 16 and ASC 842, it’s also one of the most challenging.
From manual entry errors and misclassifications to calculation inaccuracies and documentation gaps, property managers face a wide range of pitfalls.
The good news? These errors are largely preventable with modern systems like NetSuite, which automate key tasks, strengthen compliance, and provide clarity across lease portfolios.
By adopting lease accounting NetSuite solutions, property managers can:
- Eliminate manual mistakes
- Ensure accurate classifications and calculations
- Keep leases up to date
- Maintain robust documentation
- Simplify audit processes
In today’s environment, where financial transparency and accuracy are paramount, NetSuite isn’t just a tool, it’s a strategic asset that enables property managers to operate with confidence, precision, and compliance.
