The timeline for FASB ASC 842 implementation is a whopping 3 - 6 months long.
That’s about 123 days.
For public companies with fiscal years ending in mid-2019 or private companies with fiscal years starting in January 2020, the time to start the implementation process is now.
Given the financial reporting demands of the new mandate, it’s clear you’ll need to find a software provider to help you through the changes sooner rather than later. And it’s important you find the right solution based on the unique complexity of your leases and your organization.
If you look online, all providers seem to say the same thing.
And while it’s somewhat comforting there’s no killer feature or massive gap, there is a major difference from vendor to vendor.
Not all suppliers’ experience, capabilities, and support are the same.
As we’ve come to learn, some suppliers present very well, but after contracts are signed, things are uncovered that weren’t disclosed in the sales process.
At AMTdirect, we’ve been handling lease administration and accounting for 20 years. It’s safe to say, we don’t have anything to hide. So we’re calling out some of the potential “buyer beware” scenarios in an attempt to help you make a wise choice.
Here are the 5 surprising implementation secrets providers aren’t telling you in the sales process.
1 - The features aren’t fully developed and the product road map is in flux
Seems like there’s a land grab right now for lease accounting features.
New providers are popping up every day. And ERP systems are releasing FASB modules.
Certainly this is a normal part of entrepreneurship: Find a market and a problem, then deliver a solution with software. The thing they aren’t telling you, though, is their FASB 842 features aren’t fully developed.
Sure, they have a working demo, but the code is still being written as they sign and onboard clients.
If you’re managing hundreds of leases, it’s risky business to go with a new provider. Your complexity probably surpasses the road map.
There are really 4 mature providers in the market. (Yes, AMTdirect is one of them).
It’s best to keep your vendor selection to the pros.
2 - Most providers are new at this
It’s true - a lot of vendors are new to the market. This is their first FASB module.
So the first question you should be asking your vendor is if they have any active integrations in the pipeline now.
As noted, the space is quickly getting crowded, or so it seems. But just because someone can code software for lease abstraction and managing terms, doesn’t mean they’re prepared to answer your questions from experience.
This is the first rodeo for ERP companies and new providers jumping to provide a FASB accounting solution. The risk of non-compliance or restating financials is serious.
Again, it’s best to go with a software provider with deep experience.
3 - Integrations are built as needed
When you ask about integrations, pay close attention.
Expect your sales rep to say, “Yes, we integrate with XYZ.”
When you hear that, you can really interpret it as meaning, “We’ll go build it.”
The truth is, most ERP systems - especially the newer ones to the market - don’t have standard features built out. They’re figuring it out as they go.
And to win your business, they’ll build whatever you need.
But that won’t work for you. You need a system with integrations and features already set up. You want a system where everything’s already been tested and the kinks worked out so you can get up and running with compliance quickly and easily… no mistakes involved.
Instead, the more important question you should be asking vendors is: “Have you integrated with this system before? And what other systems do you already integrate with?”
You want to fully understand what integration looks like.
While no provider has integrations built for every system that needs to pair, you’ll want to understand what the compatible systems are and the processes.
And you’ll want to make sure these match your have-to-have integrations.
4 - Your data format may not translate even if you use their system today
Just because you have a lease administration platform today doesn’t mean the data format you use will translate to the new FASB model… or to the vendor’s software system.
We’ve heard more than a few stories about new modules from existing suppliers that required a complete set up.
It takes time and energy that a lot of companies aren’t planning for.
Be sure to ask how current systems are updated to meet the new standards. This will be essential to planning your FASB ASC 842 implementation and understanding the complete timeline for transferring all your leases to a new system.
This is one step you must get 100% right.
Without accurate data, nothing is going to make sense. In fact, you set yourself up for errors that could be fatal to your FASB 842 execution.
5 - Training, support, and customization are extra
One of the biggest supplier surprises has to do with customization.
Some providers charge extra fees for any type of field customization and non-standard reporting. But they don’t tell you this until after you’ve signed the paperwork.
Don’t get wooed by a slick demo.
This eye candy isn’t necessarily what comes standard with a contract, so be sure to ask what’s included and what’s not included.
In general, working with companies who nickel and dime you for features is going to be a pain in the long run.
Conclusion: The Answer to Your FASB ASC 842 Implementation
Because it takes so long to implement FASB 842 and onboard to a new lease administration software, you’ll want to start the vendor selection process right away.
And asking the right questions will be paramount to a profitable vendor relationship.
Taking the time now to select a trustworthy vendor and assess features and capabilities will set you up for implementation in the least amount of time, effort and expense. Vendor selection is just too important to the success of your business not to take seriously.
Avoid these “buyer beware” scenarios at all costs.
New Rules. New Requirements. The FASB 842 Checklist You Need.
Your lease data is the core of FASB ACS 842 compliance.
The new rule will require you to abstract as many as 55 data elements from leases in order to determine the lease status.
And the new standard brings new abstraction requirements.
The FASB 842 rule will require additional lease data that isn’t commonly abstracted today. Information like fair market value and whether options are likely to be renewed is probably not sitting in your lease admin system today.
And your equipment lease data… is most likely in a file cabinet.
So, even having a current lease management system doesn’t guarantee an easy transition.
Because current lease data collection is insufficient, we created The FASB ASC 842 Lease Abstraction Data Checklist and Worksheet.
It’s a comprehensive checklist of the data you’ll need to collect in order to correctly classify and report on each lease.
Download the checklist today.