With FASB’s new lease accounting update, ASC 842, companies may be struggling to establish procedures that make the transition easier. But with any new process, companies will make iterative improvements. Here are four mistake to avoid when dealing with foreign language lease agreements.
1. Improper storage or organization of lease files
Most leases are scanned as PDFs, making them difficult to search or machine translate. Most companies do not go to the trouble of converting them to a uniform access-friendly format. File conversion makes it simple to extract key data needed for financial reporting and for translation.
Lease files may be scattered across the globe on various computers rather than online, where they are easy to access for everyone, from the translators to the accountants, at any time. A simple and effective folder structure would be:
- Lease Agreements
- Address 1
- Address 2
- Address 3
The lease agreements folder would be accessible by everyone and everyone would know exactly where their files should go.
2. Abstract a foreign language lease contract without translation first
Typically, an internal resource in a foreign office who is bilingual will be called upon to abstract the lease directly – skipping the translation process. However, being bilingual may not be sufficient to read a technical document such as a lease contract. Lay people oftentimes have trouble comprehending lease contracts in their native language, which is what bilingual internal resources may be if their training was only in one language. Moreover, validating that the work was done correctly may be challenging to people in the US office or even a third party auditor.
3. Improper leases translation methodology
The standard translation process includes a professional translator and editor. This is excessive for the goal, which is sufficient comprehension to abstract the lease. The cause of this is requesting a translation company to translate a lease. Without explaining the purpose for needing the translation, the translation company risks applying an improper methodology.
On the other extreme, machine translation is not sufficient for lease contract abstracting because machine translation translates words rather than meaning, and thus the meaning of the translation may be incorrect (it almost always is).
The entire lease does not need to be translated by a professional; machine translation as a first pass is sufficient. However, to avoid misunderstanding the translation output, use a professional only on the sections of relevance. This is the most cost-effective approach.
Finally, take advantage of machine learning technology and train the machine translation engine to learn from the professional translator. As a result, the machine translations improve with each lease. This exponentially improves both the speed and cost-effectiveness of this process.
Partnering with a specialized translation firm overcomes this mistake completely.
4. Improper use of internal resources to translate a lease contract
Keeping the translation of foreign leases in-house is not only incredibly time-consuming, but it is also expensive. Any translation firm will agree that a professional translator is less expensive than an accountant or nearly anyone else that works at an accounting firm. The opportunity cost of any internal resource dedicated to this task over any other more profitable task is immense.
It is more cost- and time-effective to work with a professional translation firm who has deep experience translating foreign leases. The task will be handled with minimal resources and intervention.
Contact us today to learn more about how to improve your lease agreement process.
Because businesses are now required to disclose lease commitments on the balance sheet with FASB’s ASC 842 standards update, there is going to be significantly more work for corporate accountants and lawyers, especially if foreign leases are involved. Developing a streamlined lease agreement translation process with the right technology and lease translation partner can mitigate time, cost, human error and cut down on the stress that this new requirement can bring.
There are many reasons for taking the time to create a workflow that is as automated and effective as possible.
1. You may be dealing with potentially hundreds or thousands of lease contracts
Large corporations may work with a sizable number of foreign lease operators, and that means they likely have those leases in foreign languages. Even if you have translators in-house, this work could flood their desks for years.
Automation is the answer when it comes to having so many leases that need translation. The more that can be taken care of through established processes, such as converting all scanned documents to a searchable and translatable file format and having a centralized file management system will save time for the rest of the workflow.
2. This is not a standard translation process
With standard translations, human translators are essential. While they have their place with lease translation documents, much can be handled through an enhanced machine translation process. A human translator can review the machine translation for accuracy, so translators spend less time overall on the process when machines assist, which means the translated leases can be processed quickly and moved on down the workflow process.
3. Leverage each lease translation to minimize costs
Because much of the legal verbiage will be identical from lease to lease, computers can automatically parse those sections and insert these previously human translated content using unique translation memory, saving time and money on the translation process while still retaining human-quality translations.
4. This is a people-intensive process
With so many people involved in the workflow, from administrators who scan the initial lease, organize the files, direct them for translation and then for abstracting; to the translators, editors, and project managers involved in the translation process; to the accountants who ultimately utilize the lease information, it can be easy for things to get out of control. That’s why having centralized file management, and an established and streamlined workflow process is essential.
Take the time to identify what your lease agreement translation process will look like, including all participants in the planning process. Having an established workflow will mitigate stress, problems and costs.
Contact us today, if you’d like to discuss how to streamline your lease agreement translation process.
The “standard” translation process is not time- or cost-effective in meeting FASB’s new lease agreement accounting standards update ASC 842. Accountants and lawyers are beginning to realize how the translation of lease agreements will fit into their workflow towards compliance. They are going to need an efficient solution that minimizes impact on transition resources. There are also several issues the will need to take into consideration when developing their new lease agreement translation process. The process needs to minimize impact on tax preparation and auditing team schedules to avoid additional problems and costs.
Key differences between the processes
The standard translation process is governed by ISO 17100:2015 and includes the use of at least two professional translators for a robust and accurate translation. This is extremely costly and time-consuming if the purpose of the translation is to aid accountants to meet ASC 842 compliance – particularly if the volume is high. Key differences between the standard process and an efficiently streamlined process specific to lease agreement translations are listed below: Read more
As companies begin to assess what changes are needed to comply with FASB’s new lease accounting standard, ASC 842, it’s important to understand the role that technology can and should play in translating lease agreement contacts for abstracting purposes.
Without a specialized set of translation technologies, translating multiple leases to comply with ASC 842 can be extremely time- and cost-prohibitive.
Many companies have at least a few dozen, if not thousands of foreign lease agreement contacts. Now that FASB requires those leases to be reported on the balance sheet, getting them translated is a practical requirement.
Professional human translation is the right choice in most circumstances, but when there are so many documents that have very similar characteristics and that only need to be abstracted (as opposed to something requiring a higher quality of translation such as formally published marketing material), the standard human translation process can unnecessarily cost tens of thousands of dollars. That’s where a specialized set of translation technology tools can help: Read more
With its effective date of 2018 looming around the corner, an important issue of FASB’s most recent lease accounting standard (ASC 842) is the potential challenge that Lease Administrators, CFOs, and accountants will have with managing many more lease agreements.
Now that lease agreements outside the United States are required to be recognized on balance sheets, compliance will become more complicated. Globalization has resulted in an ever-increasing pressure on accountants, lease administrators, attorneys, and their firms to manage leases in a fast, reliable, and cost-effective way.
We have summarized several common points that the “Big 4” accounting firms believe should help address the new regulation. Read more