The journey into FASB ASC 842 compliance has been filled with unexpected curves and surprises for both public and private companies in the last few years.
There are countless changes to be made, terms that’ve been redefined, and added expenses to take into account.
We want to help you stay as informed as possible about the entire scope of FASB ASC 842 implementation and other lease accounting updates. We’d recommend stalking the most trusted resources on this topic.
You can start by bookmarking these 13.
The deadline for FASB ASC 842 implementation is quickly approaching, but that’s not the only thing to be aware of.
The FASB is continuously refining the standard by adding narrow-scope improvements to the original mandate. This is proving difficult for many private companies to keep up with.
And it hinders them from staying on track with their lease accounting compliance.
In addition, other significant accounting standards are also going into effect around the same time: IASB IFRS 16 and GASB 87.
This article explains why and how the American Institute of CPAs (AICPA) decided to step in and propose a postponement to help private companies with their lease accounting compliance.
Despite the difficulty many companies have experienced when shifting over to the new FASB ASC 842 standard, there’s actually an upside to lease accounting compliance.
In addition to the already existing benefits of equipment leasing, the new standard will help everyone involved in the process - including your own accountants and finance officers - by requiring more accurate and clearly defined balance sheets.
Due to this and other updates, the new FASB ASC 842 standard has the potential to greatly improve business processes and reap unexpected gains.
One of the biggest changes under the new lease accounting standards is how certain financial terms, assets, and liabilities are being redefined.
The other shift is how they’re supposed to be presented on balance sheets.
This shift is actually an improvement for investors and companies who are now able to see accurately recognized liabilities. While actual cash flows may not be changing, it’s all about the presentation.
Lease accounting compliance became mandatory for public companies as FASB ASC 842 took effect in January of 2019.
While it’s currently in effect, public companies are still slowly inching toward full adoption.
Though the new standards sound simple, the shift to lease accounting compliance is a significant change and a challenge for accounting and business operations.
Private companies should take note and start working on the transition now!
Moving towards lease accounting compliance hasn’t been an easy task for public companies. Now, all eyes turn to private companies and non-profit organizations to tackle the same challenge.
Those with more than just a few leases may be caught off guard by the amount of time and expense required to fully transition over to FASB ASC 842 compliance, as well as potential effect on financial statements.
Public companies have given us a lot to learn from in their processes of transitioning to the new standard.
Private companies have the unique advantage of learning from their challenges and embracing their triumphs to aid in their own process of moving towards lease accounting compliance.
Since 2016, the focus of lease accounting compliance has mainly been on public companies. Now the spotlight shifts to private companies as the end-of-year deadline grows near.
While overall private companies are reporting a lower state of readiness for the change, they also have the incredible advantage of learning from the experiences of public companies who are a year ahead in the compliance process.
Both public and private companies are realizing the difficulties of implementing lease accounting compliance under FASB ASC 842.
The main lesson learned from public companies is that more time is needed up front for locating all lease contracts and embedded leases to extract the data needed for compliance with the new standard.
Public companies have also demonstrated the importance of vetting and selecting the right software solution to help with lease accounting compliance.
There’s still time left for private companies to learn from the public companies’ approach and prepare in a time-sensitive and cost-efficient way.
In the newest Accounting Standards Update, the FASB clarifies key issues within FASB ASC 842. These issues were identified by stakeholders as they’ve begun the process of transitioning to lease accounting compliance.
The main clarifications concern fair values of underlying assets, as well as the exemption of having to provide specific interim disclosures during the fiscal year of FASB ASC 842 adoption.
These changes were added to ensure a steady shift into compliance while maintaining the quality of information required to uphold the standard.
Up next in updated accounting standards is GASB 87. As people begin to figure out what this new standard entails, the GASB has released an exposure draft that includes over 75 questions and answers about the update. Topics include:
- scope and applicability of GASB 87
- lease liabilities and underlying assets
- multiple component contracts
- lease modifications and terminations
- leaseback transactions
- effective dates and transition period
GASB 87 affects lease recognition, measurement, and related disclosures for governmental lessees and lessors.
Major changes have been outlined and described, but won’t go into effect until the start of 2020.
Similarly to FASB ASC 842, government entities affected by this standard should expect a time-intensive preparation for implementation. Governments should begin preparing for lease accounting compliance under GASB 87 as soon as possible.
To assist in the process of implementing lease accounting compliance under new standards, the GASB regularly releases Implementation guides.
These guides are available to offer insight into the best practices of assessing and beginning the transition to new standards.
View all of the current GASB 87 Implementation Guides in this article.
Dave Vaudt and Dave Bean of the GASB highlight the status of the organization’s current and future projects.
They discuss the Revenue and Expense Recognition project, the Disclosure Framework project, in addition to other projects scheduled for the first half of 2019.
Did you know your company has a say in future accounting standards?
The Financial Accounting Standards Board (FASB) releases multiple exposure drafts during the creation process for new standards in order to receive valuable user critiques and input.
Many companies aren’t aware of this accessibility or don’t take advantage by offering feedback when it’s asked for. Read more to find out how you can take a proactive approach to future standards and offer feedback that can benefit you and your company.
Conclusion: Lease Accounting Compliance on Autopilot
One of the best ways to stay ahead of the curve for these and future accounting standards updates is education.
The more you know, the better prepared you’ll be.
The experts on our team recommend being proactive and reading the materials that are available - especially from the governing bodies themselves.
And take advantage of the opportunity to ask as many questions as you can and provide feedback. You have the power to affect the change you want to see in future updates and be prepared when changes come.
Our team of experts have over 20 years of experience in lease administration and accounting and we’ve been preparing for these new accounting standards for almost 10 years. You can reach out to us with any questions and we’ll be happy to offer advice.
You can also schedule a demo to see our 100% compliant lease accounting software.