The FASB ASC 842 accounting standards changes bring virtually all leases out of the footnotes and into the bright shining light of financial statements.
What this means is a 360 degree shift from the way things have always been done.
Corporate balance sheets will now host trillions of dollars worth of new assets and liabilities. This will provide a practical expedient for lessors, as it gets rid of the headache of separating lease components from non-lease components in certain contracts.
And although there’s a lot of good coming out of the new standards … there’s also an ugly side to the changes that shouldn’t be ignored.
The Dirty Secret about FASB ASC 842
While the intention of FASB was to benefit both the lessee and lessor with the ASC 842 mandate… what’s come out in the wash is less than ideal.
And accountants are up in arms.
There’s a pile of unneeded complexity and unforeseen problems they’re facing with the new accounting standards.
Organizations have reported it’s way too difficult to identify their lease obligations. This is especially true with leases embedded in service contracts that have never been treated as leases (for accounting purposes) in the past.
And other companies are complaining upgrading software systems is a pain in the you-know-what.
The frustration is real.
And to top it off, last year's significant push for companies to adopt the new revenue recognition rules has roadblocked adoption of the new leasing standards.
It’s a hot mess that needs to be addressed. Immediately.
Conclusion: Nothing is Simple About FASB ASC 842 Implementation
Despite the reported problems, FASB says it’s fixed - and continues to fix - these problems to make implementation of FASB ASC 842 easier and faster.
The truth is, no matter how many technical changes FASB makes, the new ASC 842 transition will be hard. It’s a completely new way of life for accountants, their companies, and investors.
And although change is never easy, most of the time it’s worth it.
The hope is that this painful FASB ASC 842 process will increase corporate focus on leasing practices and introduce the need for better lease administration and accounting in the future.
Late Start on FASB 842? Here’s Your Answer to Tick Tock
It’s crunch time for FASB 842 compliance.
We’re inside the final six months of preparation before public companies must comply with the new lease accounting rules… and there’s a BIG problem.
As it turns out, FASB 842 compliance is proving harder than expected.
In order to put an end to the confusion, we created The Real FASB Implementation Timeline Calculator, Gantt Chart and Project Plan.
It’s designed to give you a better vision for the project phases, their individual timelines, and the overall timeline.
So you can move closer to your “go live” moment with a few less surprises.
And if you need help with that ticking clock, our lease management software is designed to help you execute FASB 842 in the least amount of time, effort and expense.
Schedule a demo to see it today!