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.

It’s pretty basic economics…

When there’s high demand for a product or service in the market, the price goes up. And the amount of providers able to offer that high-demand product or service goes down.

This is especially true when the product or service isn’t offered by many vendors in the first place. And it’s exactly what’s happening with lease accounting vendors right now.

The truth is, there’s a shortage of companies that offer financial lease accounting software.

When you consider the fact that most public companies are ramping up for year two of reporting, and private companies have only a little over a year to meet their compliance deadline, it should come as no shock that there aren’t enough solutions in the market today to support the growing needs of U.S. companies.

Even in the best of circumstances, there would be a squeeze.

And with complexities galore and stringent audits, implementing the FASB ASC 842 deadline by January 1, 2021 certainly does not present the brightest of futures.

Because this shortage is so significant and not many experts in the industry are talking about it, we’re covering it in depth. Use this information to light a fire under your own compliance efforts.

The increased transparency and comparability the FASB was going for with the new lease accounting standards may have backfired. As public companies discovered, transitioning away from routine leasing processes to ASC 842 has ushered in unforeseen nuances. 

These have spiraled into complexities that have severely - and in most cases, negatively - impacted the amount, timing, and uncertainty of cash flows.

In answer, FASB halted compliance deadlines on all of its major rulings, including ASC 842. 

But that doesn’t negate the fact that the impacts to companies who’ve already finished implementation are far reaching. It doesn’t leave private companies off the hook, either. With just a year to implement, the onus is even heavier to get the standards right. 

And when even the slightest mistakes in reporting for the new accounting standards can force auditors to make you file a financial restatement, your company can suffer the consequences in a variety of ways.

The biggest of these is making banks reconsider lending to you.

Because this one aspect alone could spell disaster for your company, we’re digging into what financial restatements are, their unforeseen negative effects on bank lending, and how to avoid them when implementing the new accounting standards.

The debate over the new FASB lease accounting standards is heating up.

A slew of complaints have been popping up in the last quarter of 2019 including one senator who’s introducing a bill to require the FASB to study new petitions in the future.

Controversy or not, one thing remains clear: No matter your lease number and no matter your company size or type, compliance with the new FASB ASC 842 changes isn’t optional.

And it’s not going to be easy.

In fact, there’s been an eyebrow-raising number of financial restatements filed in the past year. And most of them are related to the complexity of the FASB, GASB and IASB standards.  

This raises a major red flag for private companies.

In fact, the stats and stories point to the fact that financial restatements caused by the new accounting standards could be a nightmare.

Spreadsheets are the #1 tool in an accounting department’s utility belt.

That’s why they’re so tempting to use for lease accounting compliance. That and they're cheap, flexible and everyone knows how to use them.

But they do present a few problems.

In fact, we’ve debated the pros and cons of spreadsheets when it comes to lease accounting compliance again and again. But we’ve recently had the opportunity to ask real-life experts their honest opinions about the matter:

• Mike Handley, CPA & Senior Manager at CFGI
• Patrick Dwyer, Technical Accounting Manager at Element Solutions, Inc.
• Joshua Reisz, Manager of Global Financial Reporting at Kennametal, Inc. 

These experts from publicly traded companies that have finished the FASB ASC 842 implementation weighed in about the role of spreadsheets in lease accounting compliance. 

What they had to say sheds valuable new light on the topic.