Operating Leases – Vendor Invoice Changes
The U.S. Financial Accounting Standards Board and the International Accounting Standards Board (IASB) issued a new accounting standard that impacts the way Cargill is required to account for and report on our leases. Under the current rules, leases classified as operating are not reported on the balance sheet. However, going forward, we will be required to reflect all our leases (operating and finance) on Cargill’s balance sheet. In addition, the new accounting rules also require us to separately report fixed and variable lease related costs.
What changes is Cargill making to report leases on its balance sheet?
In order to comply with the new accounting requirements, Cargill has implemented TRIRIGA, a global lease management technology solution, to manage and account for operating leases, that will ensure compliance with the accounting standard.
As a Cargill vendor, what do I need to do differently to comply with the new rules?
The new accounting standard requires Cargill to account for the fixed and variable lease payments components separately. Going forward, please separate the fixed vs. variable components as well as taxes on your invoices. For example, the consistent base rent (including index adjustments if applicable) amount should be listed on a separate line from variable rent and operating costs such as maintenance, utilities, property taxes, sales tax, and other services.
Where invoices are required for both fixed and variable lease costs, existing and future Purchase Orders (PO) will be updated to separate the fixed and variable lease related costs by having separate line items on the same PO. Where invoices are only required for variable lease payments, separate POs will be set-up for the fixed vs. variable lease related costs. If an existing PO is modified or new PO created for a lease, a copy of the PO document will be sent via the same method you are currently receiving purchase orders from Cargill.
Also, going forward please include Cargill’s lease ID on your invoices. The lease IDs will be provided soon.
Cargill would like to thank you for making the above changes and helping to ensure our financial statements comply with the new accounting rules.
Please contact Cargill’s Lease Portfolio Management (LPM) team at [email protected] with questions.