Microsoft, Bristol-Myers Identify Challenges to Leasing Standard

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By Amanda Iacone

Software and data collection were the biggest challenges that Microsoft Corp. and Bristol-Myers Squibb Co. faced as the two companies each began planning to report lease obligations on their balance sheets for the first time.

Microsoft attended to the new lease standard last summer—more than a year earlier than required—while BMS plans to be ready to implement the new standard in January, an executive from each company said.

The executives discussed their leasing strategies May 17 at a Washington conference sponsored jointly by Deloitte LLP and Bloomberg Tax.

Get to Know Your Leases

“We’ve been challenged with: How do we get comfortable that we have a complete population” of leases, said Sima Basher, associate director of corporate consolidation and finance reporting for Bristol-Myers Squibb, a pharmaceutical company.

As far back as 2015, the company had its affiliates across the globe gather leases to get a sense of what types of things the company was leasing.

These included real estate, fleet, or information technology contracts, and hundreds of thousands of service contracts, Basher said.

Ultimately, 90 percent of their leases involved real estate and the company has focused on getting that right, Basher said.

BMS hired a third party to help sort through those leases—many of which weren’t written in English, Basher said.

Leasing Software

BMS has entered the software testing phase, is updating internal controls, and is reviewing service contracts to determine if they might be considered a lease under the new standard, she said.

The pharmaceutical company didn’t wait to get started—choosing software in 2016 and implementing that software in 2017. But the software the company purchased didn’t work well with its legacy systems, which will now have to be upgraded, she told the conference.

“Because it’s not really a tried and tested solution, I think it’s certainly scary going into” January 2019 when the new leasing standard takes effect, Basher said of the new systems.

Choosing software was also key for Microsoft, said Alice Jolla, the software giant’s general manager for corporate accounting.

But rather than turning to in-house software developers or an off-the shelf product, Microsoft opted to team up with KPMG LLP, which was developing its own software solution, Jolla said.

Not many software providers were ready at the time, she said.

No Procrastination

Data was also a challenge for Microsoft but they had what Jolla described as a built-in cultural advantage—the real estate management team reports to the chief accountant and were accustomed to the work of their finance and accounting colleagues, Jolla said.

The company also worked across business teams to better understand the leases managed by each, she said.

The decision to apply the new standard early forced staff to stay focused and not procrastinate, Jolla said.

To contact the reporter on this story: Amanda Iacone in Washington at aiacone@bloombergtax.com

To contact the editor responsible for this story: S. Ali Sartipzadeh at asartipzadeh@bloombergtax.com

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