The new standard stipulates that you have documentation on every lease your company has entered and gathering the required data is a massive undertaking for most. Under the new standard, other contracts will also need to be considered for potential embedded lease agreements. Examples of contracts that may contain previously unidentified lease components which need to be analyzed are service agreements, bundled service arrangements, and data service arrangements. Waiting until the last minute will put an overwhelming burden on your accounting team, and you may come up short. Get boots on the ground now so you have time to complete the process.
Implement a New Process
Once you’ve finished taking an inventory and documenting your leases, implement an updated system that accounts for the new FASB requirements. Consider using software to automate the process, and consult an expert who understands the nuances of the new standard to make sure you are compliant when it takes effect.
Communicate with Stakeholders
Discuss the implications of the new standard with your investors and lenders now. Don’t assume they are well-versed in all the complexities – or even know about the FASB changes. They may rely on experts to stay informed. If you don’t feel you can effectively communicate the intricacies of the new standard to your stakeholders, bring in an expert to lead the conversation. If debt covenants need to be modified, it’s better to find out now while you still have time. Be proactive to ensure a smooth transition.
As the clock is ticking, it’s advisable not to wait to begin taking steps. A year-end audit is a perfect time to ask your auditor what you need to do to prepare for these changes. Consult an expert who knows the standard inside and out so you don’t leave anything on the table.