This previous month, the IFMA World Workplace conference brought together dozens of market experts, hundreds of facility management professionals, and an impressive array of industry influencers to drive the conversation. The result? 3 days filled with valuable content, profitable new business connections, and fresh perspectives on the entire state of the industry.
It’s pretty basic economics…
When there’s high demand for a product or service in the market, the price goes up. And the amount of providers able to offer that high-demand product or service goes down.
This is especially true when the product or service isn’t offered by many vendors in the first place. And it’s exactly what’s happening with lease accounting vendors right now.
The truth is, there’s a shortage of companies that offer lease accounting software.
When you consider the fact that most public companies are ramping up for year two of reporting, and private companies have only a little over a year to meet their compliance deadline, it should come as no shock that there aren’t enough solutions in the market today to support the growing needs of U.S. companies.
Even in the best of circumstances, there would be a squeeze.
And with complexities galore and stringent audits, implementing the FASB ASC 842 deadline by January 1, 2021 certainly does not present the brightest of futures.
Because this shortage is so significant and not many experts in the industry are talking about it, we’re covering it in depth. Use this information to light a fire under your own compliance efforts.
The big news on the street is the delay by the FASB of the ASC 842 adoption date.
The governing body stated this deadline change will give companies more time to deal with the complexities of the transition. It will also give the FASB a chance to find out more about what went wrong for public companies. This includes digging into where there was unnecessary cost and where the standards can be improved.
A cheer went up for this extended deadline from companies just starting to look into lease accounting compliance and those in the beginning stages of implementation. After all, the delay gives laggers more time to create an adoption plan, staff adequately, and select lease accounting software.
But it’s also created a huge blind spot when it comes to lease accounting technology.
It’s a problem that’s not talked about enough in the industry, but for those companies who wait to start implementation, the writing is on the wall.
The increased transparency and comparability the FASB was going for with the new lease accounting standards may have backfired. As public companies discovered, transitioning away from routine leasing processes to ASC 842 has ushered in unforeseen nuances.
These have spiraled into complexities that have severely - and in most cases, negatively - impacted the amount, timing, and uncertainty of cash flows.
In answer, FASB halted compliance deadlines on all of its major rulings, including ASC 842.
But that doesn’t negate the fact that the impacts to companies who’ve already finished implementation are far reaching. It doesn’t leave private companies off the hook, either. With just a year to implement, the onus is even heavier to get the standards right.
And when even the slightest mistakes in reporting for the new accounting standards can force auditors to make you file a financial restatement, your company can suffer the consequences in a variety of ways.
The biggest of these is making banks reconsider lending to you.
Because this one aspect alone could spell disaster for your company, we’re digging into what financial restatements are, their unforeseen negative effects on bank lending, and how to avoid them when implementing the new accounting standards.
When it rains it pours.
Or so it seems when it comes to FASB ASC 842 and its IASB and GASB counterparts.
There seems to be a flood of issues from implementation of the new accounting standards. And most industry pros are pointing the finger at the extreme complexity of the rules.
Although there’s plenty of written guidance about ASC 842 in particular, it’s not nearly as thorough as it could be. For example, with ASC 606, the FASB held eight meetings over two years where 100 different questions or issues were discussed and documented in 60 different memos on the website.
ASC 842 did not experience the same fervor of activity or documentation.
The debate over the new FASB lease accounting standards is heating up.
A slew of complaints have been popping up in the last quarter of 2019 including one senator who’s introducing a bill to require the FASB to study new petitions in the future.
Controversy or not, one thing remains clear: No matter your lease number and no matter your company size or type, compliance with the new FASB ASC 842 changes isn’t optional.
And it’s not going to be easy.
In fact, there’s been an eyebrow-raising number of financial restatements filed in the past year. And most of them are related to the complexity of the FASB, GASB and IASB standards.
This raises a major red flag for private companies.
In fact, the stats and stories point to the fact that financial restatements caused by the new accounting standards could be a nightmare.