You may have just breathed a huge sigh of relief. 

The ball dropped at midnight ringing in 2020, giving private companies one more year to achieve FASB ASC 842 compliance.  

To many, that sounds like adequate time to accomplish all the necessary steps to implement the new lease accounting standards, but several factors will crunch that one year into a time span barely sufficient to successfully meet the new deadline.

Fewer available vendors. With 52% of private companies admitting that the delay has pushed their timeline back, you’ll be one of thousands of businesses vying for services from a limited number of lease accounting specialists, software providers and auditors. Most of these experts have already been secured by the other 48%.

More complex than you think. Based on what public companies experienced during the implementation process, the adoption of FASB ASC 842 will be more complicated and time-consuming than you expect.

Added responsibilities. Even if you’ve budgeted for additional employees or a consultant, your staff will have to complete a myriad of additional tasks associated with implementation while maintaining their normal workload.

The lease accounting software industry is booming.

And one of the main reasons why is because software automates the entire process of moving leases onto the balance sheet, a requirement of FASB ASC 842.

Before the new accounting standard, many companies managed their lease portfolios using manual processes and separate systems for real estate, procurement, contract management, and accounts payable.

All that has changed. 

In fact, 72% of public companies onboarded or upgraded lease accounting software to implement FASB ASC 842 and 61% of private companies plan to follow suit when their 2021 deadline hits. This allows stakeholders from across the company to access all lease data in a central repository.

There’s a catch, though. While lease accounting software providers are essential for completing the new accounting standards accurately and on time, there’s just not enough capacity in the industry to handle the demand.

An ounce of prevention is worth a pound of cure.

That warning has stood the test of time for one reason: Because it’s true.

And public companies that have implemented FASB ASC 842 are wishing they had taken it to heart.

Prevention means taking as much time as possible to prepare for the worst case scenario. And although public companies that weren’t of this mindset suffered the consequences, private companies needing to implement the new lease accounting standards don’t have to. 

In fact, private companies have been handed the incredible opportunity of more time to prepare, more time to take preventative measures, and more awareness about the repercussions they may face.

There are 5 main ways private companies can prepare now and trade a panicked rush to the finish line for a world-class FASB ASC 842 implementation plan.

FASB ASC 842 may not seem like a big deal. 

After all, compliance has been pushed back and budget planning for the new year is pressing in. It would seem there’s no need to start implementing the new lease accounting standards just yet.

Unfortunately, this perspective is what put so many public companies in the dog house with their implementation timeline.

And while the deadline change brings good tidings to private companies on the surface, when FASB ASC 842 hits the floor in January of 2021, it could have devastating effects on companies that drag their feet on implementation.

The tables have turned when it comes to lease accounting software.

It’s standard business practice that vendors fight to win the business of potential clients. But in the present market, the opposite is becoming more and more true. Lease accounting software companies are in more demand than ever.

And it’s all due to the new lease accounting standards. 

Many private companies have underestimated the time and resources it takes to implement FASB ASC 842 and its sister regulations, IFRS 16 and GASB 87. In fact, only 9% of companies are worried about finding a technology vendor to handle the changes. 

And that means when they finally do start the vetting process, there will be a run on the market.

Private companies looking to implement the new lease accounting standards in 2021 should choose now or risk being waitlisted by lease accounting software providers.

There’s a critical - yet extremely overlooked - piece of FASB ASC 842 implementation.

It’s lease type.

In fact, the 43% of companies estimate they only have 1-200 leases, but they may not be considering that FASB ASC 842 covers not just real estate leases, but equipment leases, vehicle leases and embedded leases, too.

And embedded leases - service contracts that contain a lease asset - have presented the biggest headaches for implementation.

Under the new lease accounting standards, reporting for embedded leases has changed dramatically. They must be reported on the balance sheet. Many companies lean heavily on supply and service contracts that contain embedded leases.

Because understanding this topic is essential to success with the new lease accounting standards, we’re diving into the specifics about embedded leases, their impacts on accounting, and a plan of attack for applying them.