In mid-October of 2019, the Financial Accounting Standards Board (FASB) approved the August 2019 proposal to delay the effective dates of some of its major accounting standards. Included on the list was the ASC 842 lease accounting compliance date for privately help companies with domestic leases. Moving forward, these companies have until January 1, 2021 to meet the compliance standard.
Before you use the added time to start a new project or book a beach vacation,remember that this is your opportunity to hunker down and get prepared. The added time should be used wisely. ASC 842 compliance is still on your agenda,you just have a little more time to get it right.
ASC 842 Preparation
We can’t stress this enough – don’t buy into the mindset that the added time means you can put off preparation. Depending on the current state of your portfolio,you may have to take lengthy steps to achieve compliance. Utilize the tips below to ensure that you make the most of your time.
Survey Your Surroundings & Develop a Timeline
ASC 842 will have a significant impact on your internal processes so it’s important to develop a strategy that’ll lead to a smooth transition and continued success.The size of your portfolio and current lease accounting processes impact the timeline of your compliance. So, take time to examine your portfolio ¤t practices, and ensure that the right people are involved. From there,you can establish a timeline and identify your needs, like lease abstracting help or new software.
Establish Partnerships
Once you make a plan and determine your needs, you can dedicate time to discovering available resources. It’s easy to get intimidated by the lease accounting process, as its intricate and substantial. Luckily, you don’t have to go at it alone. There are several great organizations out there that can offer advice,guidance, and even tech tools that will help you get compliant and stay compliant.
Organize and Abstract Your Leases
Out of everything on this list, this step will likely take the most time, especially if your leases aren’t currently abstracted.
Getting your lease data in order should be on your to do list regardless of the compliance standards, but in order to become compliant, you’ll need to ensure that you’re tracking accurate data. Not only will you need a complete income and expense schedule for each lease, you’ll need to think ahead and account for any potential changes to the lease, such as extension or renewal options. Even if you already have a system in place to manage your leases, you should take the time to audit the information and ensure that everything is up to date.
For helpful tips about the abstracting processes, check out this article. Additionally, you can learn more about organizing your leases and lease administration basics here.
Get to Know the Standard
You don’t need to head back to school for an accounting degree, but you should dedicate some time to developing an understanding of the ins and outs of lease accounting. There are several great resources out there for you to take advantage of. A great place to start is the FASB website. Additionally, PwC has a library full of helpful guides, podcasts, and videos.
