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AMTdirect Insights Blog

Accounting Checklist for the New FASB Lease Standards

FASB Lease AccountingMany organizations are beginning to realize the impact that the new FASB and IASB lease accounting standards will have on their finance and real estate teams. For companies with a large number of real estate or equipment leases, compliance with the new standard will require a significant amount of effort and time.

Although the new standard doesn’t go into effect for public companies until December, 2018 (2019 for private companies), a two-year look back will be required, so calculations will have to be completed for 2017 and 2018 as well. That’s why some organizations are working to get the structure in place during the rest of next year so that all 2017 transactions will be properly recorded as they occur, avoiding the pain of recreating the schedules later.

While the task may be daunting, there are steps you can take now to make sure that you avoid the expense and pain of a last minute scramble for compliance. Here are the most important steps to getting prepared.

Assemble the Team

While some may see this as strictly a finance problem, it is not. Streamlined compliance and optimal management will require the cooperation of finance, real estate, and legal resources.  Public Relations and Investor Relations teams should also be prepared to explain the significantly changed financial documents.

Get Educated

The new rules are far more complex than the current ones. Not everyone needs to understand all of the accounting nuances, but all of the players should understand the big picture and their role to successful compliance.

Pick a Technology

Spreadsheets will no longer be sufficient for FASB reporting. Software will need to bridge your lease data and transactions with your accounting system. Your real estate management software may already be equipped to handle the FASB and IASB calculations, or you may need to look for a new solution that is.

Gather Your Lease Data

You’ll need a lot of data about each lease, much of which you probably aren’t tracking today. Here is our list of 15 things you’ll need to know about every real estate and equipment lease. For most companies, this step will represent the bulk of the effort.

Choose and Implementation Approach

Do you have the resources to complete the lease abstraction and data entry, or will you use a partner? Keep in mind that demand for these services will certainly spike in the months to come, so if you would like to engage a partner, it is a good idea to act quickly.

Revisit Lease Negotiation Practices

The structure of each lease will have a significant impact on how it appears on the P&L, so it may be wise to rethink what you ask for and evaluate your most favorable terms. You may also want to change your approval procedures to account for the greater impact of each lease on your financial statements.

Consider Renegotiating Current Leases

The reporting rules apply to all leases in the portfolio, not just new ones, so it may be wise to take a look at your portfolio and target some leases for renegotiation.

Set a Project Timeline

The end of 2018 may seem like a long way away, but as we mentioned, you’ll need look back numbers for 2017 and 2018, so it makes a lot of sense to get ahead of the curve and avoid double work.

Be the Hero

Even if financial compliance is not your “job,” you can help your organization avoid a lot of headaches and expense by championing the effort to get ready for what’s to come. Of course, we’d be delighted to help.

Let's Talk Compliance

Posted on 6/29/16, 6:56 PM by Taft Tucker in FASB

Taft Tucker

Written by Taft Tucker

Taft is the Chief Customer Officer at AMTdirect and is a resident expert about lease administration and accounting. Taft's passion is to share practical, helpful information about our industry.