Lease Accounting Services
The new lease accounting guidance presents an opportunity to proactively implement new processes and policies while simultaneously taking inventory of your Company’s lease populations, and assess the impact on future financial reporting.
Services include: data extraction, process mapping, internal controls, change management, software advisory, software readiness, financial impact modeling, and impact analysis on debt covenant calculations.
Here are a few quick facts about ASC 842.
- Effective Jan. 1, 2019 for public companies.
- Effective Jan. 1, 2021 for non-public companies. (tentative decision pending comment period expected to be finalized September 2019).
- All long-term operating leases will be presented on the balance sheet.
- Financial statement disclosures will be expanded.
LeaseQuery – Lease Accounting Software
The new regulations for lease accounting were released in 2006 by the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB). The new standards, known as FASB Topic 842 and IFRS 16 call for sweeping changes to how companies account for their leases. For most public companies, and those that report under the international standard the effective date of the new standards was January 2019; for most private companies the effective date is January 2021.
Complying with the new regulations requires in-depth understanding of the new standards, as well as software that enables accuracy and efficiency. Many companies are choosing to leverage consultants to ensure their compliance. LBMC has partnered with LeaseQuery, a leading provider of lease accounting software, to offer LBMC’s clients a comprehensive lease accounting solution to supplement their lease accounting expertise with a software tool that is built for compliance.
Are you using Excel for Lease Accounting?
Relying on Excel increases your risk of non-compliance with ASC 842 and IFRS 16. Before you invest time and resources into building your spreadsheets, watch this whiteboard discussion with LeaseQuery CEO George Azih.
What you Can do With LeaseQuery?
- Get an overview of your lease portfolio with the dashboard.
- All required disclosure reports are at your fingertips with lease-by-lease detail. Build any custom qualitative and quantitative reports you need based on attributes required during lease entry.
- Access journal entries required for compliance at any level within your organization & upload to your general ledger with ease.
LeaseQuery enables you to eliminate errors that will lead to material misstatements using our CPA approved software, implementation process, and support from specialized lease accountants. And we do it with minimal disruption to your daily business.
LBMC’s 3 Steps to Prevent Costly Implications From Lease Accounting Standards
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.
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