How Opportune Can Help You Prepare for the New Lease Accounting Standard
The Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC) 842, issued in 2016, will have a significant impact on how businesses manage, account for and report substantially all leases, including equipment and real estate. Because of the meaningful accounting changes involved, it’s important businesses begin preparing now to comply with the new standards.
What DoES The Lease Accounting Standard Mean?
ASC 842 will require organizations who lease assets— referred to as "lessees”—to recognize, on their balance sheet, the assets and liabilities for the rights and obligations created by those leases with terms greater than one year.
Specifically, ASC 842 will impact:
- New processes;
- Upgrading technology;
- More detailed reporting requirements; and
- Technical accounting assessments
When DoES The New Lease Accounting Standard Take Effect?
ASC 842 will require public companies to include all leases with terms greater than one year on their balance sheet for annual and interim reporting periods beginning after December 15, 2018 (Effective Date). The private company Effective Date provides a one-year deferral, December 15, 2019, for annual reporting periods and interim periods the following year. Early adoption is also permitted for all entities.
Lease Accounting Challenge - Governance
Typically, these agreements are entered into by multiple, disparate departments and not centrally managed. Payments for leases are processed either through a centralized accounts payable (AP) group or by the originating department. The challenge is to integrate not only the contract origination and management processes, but also the payment processes. Integrating purchase order (PO) and non-PO AP processes with lease contracts is most likely not done in your organization today.
How Opportune CAN Help YOU PREPARE FOR NEW THe LEASE ACCOUNTING STANDARD
Opportune can offer technical accounting guidance and lead technology implementation projects by leveraging our ASC 842 experience and lessons learned such as the importance of a clearly documented approach to adoption, proving completeness of the lease population and locating unidentified leases. Opportune also facilitates roundtables with industry peers to discuss common issues and call upon our experience to act as a client-advocate in situations where audit firms are reaching inconsistent answers with industry peers.
Opportune's Complex Financial Reporting Practice includes members who have served lead roles on Fortune 250 ASC 842 cross-functional teams. Opportune’s Process and Technology staff have coordinated, led and assisted large-scale lease accounting software implementation projects, as well as built customizable small-scale solutions for clients with fewer leases.
In addition, Opportune has an energy sector focus with deep upstream experience and technical accounting experts to interpret ASC 842 guidance. We can address both the technical reporting requirements and the technology aspects of any lease solution selected. Opportune's experienced team of professionals can provide synergies and cost savings as it relates to the new lease accounting standard.