Background
One striking lesson from the initial years of IFRS 16/ASC 842 implementation is the difficulty of managing lease accounting obligations using traditional tools like spreadsheets. Many companies started out with Excel-based models to track their leases and compute the required entries, only to discover that the complexity quickly exceeded what manual processes could handle. There are several reasons why spreadsheets become inadequate as lease portfolios grow:
Volume and Complexity of Calculations: Each lease requires its own amortization schedule for the lease liability—reflecting interest accretion and principal reduction over time—as well as a separate schedule for depreciation of the right‑of‑use asset. As a result, an entity with, for example, thirty leases must maintain and update dozens of interrelated lease‑specific calculations each reporting period. KPMG has observed that even portfolios of fewer than 100 leases can generate hundreds of individual calculations per period for a lessee, significantly increasing operational complexity and the risk of error (KPMG, 2020). Every additional lease increases the workload non-linearly – 10 leases are not too hard to manage, but 50 leases might be unmanageable in a single workbook.
Remeasurements and Modifications: Real-world leases are not static. They get modified, extended, terminated early, or have terms that change (for example, rent tied to an inflation index will require updating the liability when the index changes under IFRS 16). Handling these lease remeasurements in Excel is cumbersome and error-prone. It involves revising cash flow forecasts, recomputing present values (often with updated discount rates), and adjusting carrying amounts of assets and liabilities mid-stream. A mislinked formula or a forgotten step could lead to material misstatements. According to PwC, once an organization has “more than 20 leases or expects ongoing modifications,” manual processes for lease accounting become impractical (PwC, 2018). Keeping track of which leases need remeasurement (and when) is itself a challenge that spreadsheets don’t easily automate.
Multi-standard Reporting: Some organizations need to report under different frameworks (e.g., a subsidiary reporting under local GAAP for statutory accounts but under IFRS or US GAAP for group consolidation). This can mean maintaining parallel calculations for IFRS 16 and, say, ASC 842 for the same lease, since the expense and classification rules differ slightly. Doing this in one integrated system is feasible (some lease software can produce outputs for multiple standards from the same data), but doing it in Excel might require duplicate schedules and careful reconciliation. The process is ripe for error. As one commentary put it, dual reporters should “avoid maintaining separate spreadsheets for each framework” and instead use software to handle multiple standards from a single data set (Olivier, 2026).
Human Error and Control Issues: Spreadsheets are notoriously susceptible to input and formula errors, and they typically lack robust audit trails. In lease accounting, where precision is critical and the same data feeds into numerous journal entries and disclosures, an error (such as using the wrong number of periods, or an incorrect formula for interest accrual) might go unnoticed and propagate across financial reports. Auditors have found and reported a variety of such errors in early implementations where spreadsheets were used: for example, some companies initially miscomputed their lease liabilities due to mistakes in handling rent-free periods or renewal options in Excel, leading to restatements or control deficiencies. The new standards also require extensive disclosures (maturity analyses, weighted average lease terms and discount rates, etc. for IFRS 16, and different sets of disclosures for ASC 842’s operating vs finance leases). Compiling these from spreadsheets is time-consuming and error-prone, whereas software can often produce them at the push of a button.
The real Excel breaking point usually isn’t the formulas—it’s control. Once auditors start asking for change history, approvals, and repeatability, a workbook (even a well-built one) can’t give you a clean audit trail.
Given these challenges, accounting firms have strongly advocated for companies to use specialized lease accounting software as the number of leases grows. The Big 4 firm guidelines highlight thresholds and red flags:
PwC (2018) suggests that once organizations have more than ~20 leases or face frequent lease modifications, a systematized solution is advisable.
EY (2019) notes that even when lease counts hit the “double digits,” spreadsheets become unreliable due to the sheer volume of data and potential for mistakes.
Deloitte (2018) indicates that once an organization has on the order of 20–50 leases, managing them without a dedicated system becomes “operationally unscalable” – meaning the effort, risk, and chance of missing something important (like a remeasurement trigger or a disclosure requirement) is too high.
KPMG (2020) points out that a portfolio of under 100 leases can still entail “hundreds of calculations per period,” as each lease generates multiple line items (interest, depreciation, possibly foreign exchange adjustments, etc.), so manual methods don’t really scale.
In practice, many companies heeded this advice. After the initial adoption phase, surveys showed that a majority of large and mid-sized companies implemented new lease accounting software or significantly upgraded their systems to handle IFRS 16/ASC 842. Even some smaller companies chose to adopt software solutions, especially if they expected their lease portfolios to grow. The cost of software was often justified by the reduction in labor hours and the mitigation of risk of error or non-compliance. Moreover, the ongoing effort for quarterly and annual reporting (roll-forward of balances, producing footnote disclosures, testing for impairments of ROU assets, etc.) is greatly simplified by automation.
Excel vs Systems: Where Things Fall Apart
In theory:
· Excel can handle lease accounting
In practice:
· it breaks quickly
When It Breaks
· ~20+ leases
· modifications occur
· dual reporting required
Why It Breaks
· complexity compounds
· errors propagate silently
· no audit trail
And most importantly:
The moment calculations become even slightly statistical, many accountants disengage.
Not because it’s hard—but because it’s unfamiliar.
In summary, manual spreadsheet-based lease accounting may be feasible for very simple situations (say, a handful of leases with no changes), but beyond that point it can quickly lead to errors and excessive effort (PwC, 2018; EY, 2019). Companies should consider the complexity of their lease portfolios – number of leases, variability of terms, need for dual reporting, etc. – and heed the guidance from experienced practitioners. When approaching or surpassing the ~20 lease mark, or if lease terms are frequently modified, investing in a dedicated lease management system is generally prudent. Not only does this reduce the risk of mistakes (which could lead to misstatements or audit findings), but it also frees up accounting staff to focus on analysis rather than number-crunching. Next, we will discuss how Sage Intacct Lease Accounting addresses these needs.