Whether your company has only a few or thousands of leases, adopting the new lease standard can be a complex and time-consuming exercise. Experience from many public companies that adopted ASC 842 or IFRS 16 found that the adoption took much longer than expected.
Be better prepared by answering the questions associated with each of the following areas (expand area for question);
Do you understand the regulations and how this impacts your company?
For many companies understanding the new ASC 842 standards has been complex and requires a higher level of internal effort. It is difficult to ensure compliance when the effect that these accounting standards have is not fully understood. If you are unsure of what ASC 842 means for you or would like to ease the burden of internal effort and ensure that you are meeting requirements let us know, we have CPA's dedicated to making sure your company gets this right.
Have you identified all the lease agreements within your company and assessed if ASC 842 applies?
This is one of the most important aspects of transitioning to the new lease accounting standard. Under ASC 842 regardless of whether the lease is a finance or operating lease, it will be accounted for on the balance sheet.
Has your accounting group determined how they are going to consolidate, manage and report for these lease agreements?
Under ASC 842 if an operating lease is missed it can have a material impact on the company’s financial statements. It is important that the accounting team has done a thorough review and have a robust system that will reduce the risk of any incorrect calculations and allow for auditable reporting.
What new internal controls will you be required to implement as part of this new standard?
It is important to consider the processes used by accounting and lease administration staff in how they are inputting leases, administering changes, and performing monthly updates. Your day-to-day accounting needs to align with these new regulations and ensure accuracy as you book lease costs.
Do you understand all of the technology options available to your organization?
When it comes to the technology used to track leases you have options. A modernized, robust system built specifically for Lease Accounting will give you peace of mind that your leases are being handled with accuracy and compliance while easing the burden on your own internal team.
The most critical question companies should be asking software vendors is how long does your system take to implement?
Not all systems are the same. Companies should be asking how long it takes to implement a solution in order to ensure that time and resources are not wasted on a process that doesn't align with overall objectives. Factors such as Master Data and General Ledger size, configuration, and validation of your lease accounting history should be kept in mind when approaching this project. Generally, you'll want to have a team of dedicated individuals and budget anywhere from 1 to 3 months for implementation.
Have you heard of Black Owl Systems and how they are helping companies modernize lease accounting?
Black Owl is a cloud-based Lease Accounting application with the flexibility of being delivered in your own environment (cloud or on premise). This solution has been architected to follow financial reporting standards and leading accounting practices, still providing the flexibility you need to record and reconcile all your lease entries and adjustments. At Black Owl Lease Accounting is what we do best, our expertise will guide your compliance process so that your team can focus on other strategic areas of the business.
We offer a complimentary consultation to review your lease accounting process and offer advice on ways you can save time and reduce the risk of incorrect accounting errors. All it takes is a quick chat to get you setup with new benchmarks for 2022 to improve your lease accounting process. Submit the form above to speak with a CPA today.
