ASC 842: The New Compliance Deadline for Private Companies and How You Can Prepare

 March 6, 2020

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 &
current 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. 

You Might Also Like:

The Secret to FASB and ASC 842 Compliance

About the author 

Meredith Beasley

Meredith Beasley serves as the VP of Marketing & Communications for Quarem. She is responsible for developing and implementing Quarem’s global branding strategy and works with both digital and traditional forms of media to better establish the Quarem brand.

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