Lease Accounting Under ASC 842: Why Excel Isn’t Always Enough

Late-stage startup finance teams are under pressure: ASC 842 compliance is no longer optional, and lease accounting has become a recurring pain point for Series B/C companies preparing for audits or fundraising. Many teams start with Excel, understandable given lean resources, but when leases scale beyond a handful, spreadsheets quickly become a liability.

Late-stage startup finance teams are under pressure: ASC 842 compliance is no longer optional, and lease accounting has become a recurring pain point for Series B/C companies preparing for audits or fundraising. Many teams start with Excel, understandable given lean resources, but when leases scale beyond a handful, spreadsheets quickly become a liability.

What ASC 842 Really Requires

At its core, ASC 842 requires companies to bring virtually all leases onto the balance sheet. That sounds simple, “just put the lease liability on the books.” But in practice, compliance is far more complex. 

Many teams make the mistake of treating ASC 842 as a one-time project. They build templates, calculate entries, and post the numbers in year one. But then the files sit untouched until the next audit cycle, which triggers panic. The reality is that ASC 842 is an ongoing standard. Finance teams must keep lease data updated, rerun calculations when terms change, and re-perform the same reporting year after year. Without that cadence, every audit becomes a fire drill.

In addition, compliance requires:

• Ongoing updates when new leases are signed, or existing leases are renewed, amended, or terminated

• Recurring calculations that tie directly to contract terms

• Documentation of assumptions auditors can test and validate

• Formal technical memos and supporting workbooks to satisfy audit requests

• Disclosure support for financial statements

“We’ve seen teams go 12+ months without touching their lease calcs. Then it’s panic mode when they need updated disclosures or audit support.” - Kyle, Zeroed-In Consulting

That reality is why, without a systemized process, compliance becomes a yearly scramble. 

When Excel Is Enough and When It Breaks Down

For startups with fewer than 10 leases, Excel can be a practical, cost-effective solution. With careful version control, clear documentation, and disciplined updates, small portfolios can be managed in spreadsheets.

But once a company crosses that threshold, the risks compound:

• Version control failures: Different tabs, broken links, or overwritten formulas can produce inconsistent results auditors will challenge

• Complex calculations: Incremental borrowing rates, variable lease terms, and modifications are difficult to model accurately

• Lack of audit trail: Auditors want to see not just the numbers but the assumptions, history, and supporting documentation. Excel rarely delivers this at scale

• Team turnover risk: If the person who built the model leaves, the knowledge often goes with them

Why Auditors Care

Auditors know lease accounting is a common failure point. In fact, ASC 842 continues to show up on PBC lists as one of the top audit readiness pitfalls. Lack of documentation or inconsistent assumptions slows the audit and raises red flags for investors. 

Startups often underestimate how often ASC 842 comes up in audits. Without clear documentation, audits devolve into endless back-and-forth. That’s where finance leaders burn out, chasing support they should have built months ago

How to Scale Beyond Excel

When lease counts exceed 10, or when leases have complex modifications, variable terms, or international components, dedicated lease accounting software becomes the smarter investment. Tools like Trullion or FinQuery automate calculations, maintain audit trails, and generate the disclosures required under GAAP.

The ROI is clear:

• Audit-ready documentation without scrambling each year

• Automated disclosures that flow directly into financial statements

• Reduced error risk in calculations and reporting

• Time savings for lean finance teams

At this stage, software also helps meet technical accounting requirements auditors expect.

How Zeroed-In Helps

At Zeroed-In, we’ve helped dozens of late-stage startups transition from manual spreadsheets to audit-ready lease accounting systems. Sometimes that means cleaning up a legacy Excel model and creating sustainable processes. Other times, it means implementing software and training the team to maintain compliance going forward.

Our approach:

1. Assess lease volume and complexity

2. Evaluate whether Excel is sustainable 

3. Build a repeatable process with clear documentation and supporting memos

4. Support implementation of the right software when needed

5. Act as translator with auditors to ensure compliance holds up under review

This structured support keeps ASC 842 from becoming an annual fire drill and aligns with our broader audit prep focus areas.

Key Takeaways for Finance Leaders

• Excel works for small portfolios (under 10 leases), but anything more introduces material risk

• ASC 842 is ongoing, not a one-time compliance project

• Auditors expect documentation and repeatable processes, not ad hoc spreadsheets

• Software saves time and protects credibility when lease counts scale

Need help deciding if your leases belong in Excel or software? 

Schedule a discovery call with Zeroed-In.