It’s July 2022 which means that the Financial Accounting Standards Board’s Accounting Standards Codification 842, also known as ASC 842, has officially come into play for US private companies. ASC 842 changes the way companies account and report their lease obligations whether they are a lessee or lessor. It brings all leases onto private company balance sheets by creating right of use (ROU) assets and liabilities. This means, operating leases will now be on the balance sheet, and capital leases become finance leases. The main takeaway from this standard coming into effect is understanding the impact on regular operations.

What should companies do if they haven’t implemented ASC 842 yet?

The first step is understanding all your leases. A fleet of vehicles, heavy equipment, global offices with a different lease for each copier – it all adds up. And it’s not just about the initial adoption of the new standard; it’s also about the ongoing process of maintaining compliance. The accounting department needs to have a seat at the table and be in the know when it comes to negotiations and executions to avoid being behind amortizing leases. It’s also important to have a clear idea as to what constitutes a lease. Some contracts for IT data management, cloud services, transportation, and advertising can have lease connotations somewhere in the fine print.

The second step is recognizing the effect to financial statements that implementing lease accounting will have and ensuring that all interested parties are well informed. A 10-year office lease can be a large liability and would require the proper explanation to board members and audit committees. It is beneficial to have all your leases in one place so that your organization can analyze their impact better.

When you should you adopt a Lease Accounting Solution?

Depending on your organization, you might have a small number of leases and so you might be able to handle implementing ASC 842 on your own and perform your lease accounting using spreadsheets and adopting a “business-as-usual” stance. However, as we’ve seen over the past couple of years, spreadsheets are not agile enough to handle the pace of change that is the new “business-as-usual.” From executives to lower-level finance team members, everybody expects the information they need immediately. Legacy applications are too slow.

How much should you be spending on Lease Accounting?

Sadly, there isn’t one specific answer. There are too many variables across industries. It’s not just about monetary cost; there is the time and effort to manage leases on your financial sheets monthly and annually. Use the following chart to estimate for your own company how much lease accounting is currently costing and where savings could be found.

We Can Help

If your current ERP doesn't have sufficient leasing capabilities, we can help you migrate to a much more robust lease accounting solution, like Black Owl Systems. If you are interested in learning more, please contact us.

iSP3 was joined by Greg Kautz (CPA, CMA) and Derek Kautz (CPA) Co-Founders of Black Owl Systems to discuss the importance of modernizing your lease accounting systems. The following video highlights from the presentation focus on how modern lease accounting solutions can assist and bring value to organizations as well as looked at today's main challenges.

Modernizing Lease Accounting

How can modern lease accounting solutions assist and bring value to organizations?

Lease Accounting Challenges

Why has accounting become so much more complicated, in particular lease accounting?

If you’d like to explore this topic further via an extended demo of the Black Owl Lease Accounting solution, please contact us.

FOR IMMEDIATE RELEASE: October 28, 2021
William Liu
iSP3 solution providers inc.
wliu@isp3.ca

iSP3 Selected as Canadian Partner for Black Owl Systems Lease Accounting Software
Innovative Solution Based on Strong Accounting Principles for Cloud or On-Premise

Vancouver, BC, Canada: iSP3 solution providers inc. announced today that they have been selected as a Canadian partner for Black Owl Systems’ revolutionary Lease Accounting software. Black Owl Systems is delivering a new approach to lease accounting software which is founded on strong accounting principles and can be utilized with the modern technology of cloud or on-premise.

Typical lease accounting can be quite complex and increase the time and effort required to ensure calculations and disclosures are correct. Black Owl Systems is setting a new benchmark in lease accounting with an easy to use yet comprehensive and complete solution ensuring you can easily manage your leases to be IFRS and US GAAP compliant. This is a far more robust system than other lease accounting solutions as it delivers many benefits that are designed to directly reduce burden of managing leases and increase ROI for companies.

“This partnership will bring great benefit to all of our customers who lease physical assets, no matter what ERP they run,” said William Liu, Senior Partner at iSP3. “As we've seen, the regulations for lessee and lessor accounting are intricate and using manual spreadsheets to create schedules and journal entries overlook many of these important calculations. Black Owl Systems has designed a solution to reduce the risk of incorrect accounting, ensure compliance for reporting in IFRS 16 and ASC 842, as well as a host of other benefits. We look forward to the opportunities that this solution will bring to our customers.”

About iSP3
With over 20 years in the ERP industry, iSP3 solution providers inc. delivers quality consulting services and solutions to the JD Edwards EnterpriseOne, World, and Cloud customer base. We now include Nextworld as a tier-one ERP solution for our clients who would benefit from a no/low-code platform to provide unprecedented agility to their business. Whether you require assistance with implementations, upgrades, migrations, or technical and functional services, our team’s knowledge and experience are here for you.

About Black Owl
Black Owl Systems Inc. is a Canadian company, developing and delivering innovative accounting solutions designed by accountants for accountants. Their system is built to comply with IFRS 16 and ASC 842 standards but follows the methodologies of standard accounting practices. Our business applications are developed in North America using modern cloud-based technologies to ensure delivery of leading global enterprise solutions.

For more information contact wliu@isp3.ca or visit https://www.isp3.ca/lease-accounting/.