In the near future, ASC 842 compliance will be mandatory. As they work to achieve compliance, private firms and not-for-profit organizations must prepare for a complex transition process.
The FASB’s new standard creates a number of new accounting problems for non-public businesses. This article is intended to assist private firms in navigating the transition and gaining financial knowledge on their journey to compliance.
How to know if your organization is ready for ASC 842?
You’ll face unforeseen issues as you adapt your company to ASC 842, extending the transition period. You’ll be able to tackle these difficulties more successfully if you prepare ahead of time.
Your preparation should begin with general data management and recording every lease on your portfolio.
Make sure you do have detailed sub-lists of leased equipment for master lease agreements and the capitalization threshold assessment for scoping out leases that are of lower value. Utilizing dedicated software solutions are of great help. Otherwise, hiring a 3rd party consultant might also be beneficial.
Successful transition – managing it is challenging in many ways
Once your business sets it goals on complying with the new ASC 842 standard, the transition needs to be managed. People, processes and tools are integral parts of managing lease accounting and hence, it is imperative to oversee how the transition is going for them, in order to make it easier and/or generate results faster.
Appoint an individual or a team to manage the transition
It’s quickest if you can find someone in-house, but there are also externally available human resources that you can utilize for your needs. Since a lot of things are changing, there needs to be coordination amidst the changes related to people, processes and tools.
If everyone just goes about in how they see fit, it will be chaotic. Some one individual or a team of them should coordinate and plan both long-term and on a day-to-day basis. They can use dedicated ASC 842 finance lease software to create tasks, assign them, change their status, etc.
Re-evaluate your software choice
Since it handles most of (if not all) data, related to your lease portfolio, lease accounting software is at the core of the transition. If you have your software choice ready before the transition de facto starts, you can already have your staff ready and trained to utilize it in full capacity from day one. It’s high time to adapt dedicated solutions if you still rely on Excel and simple calculators.
Beyond compliance, software can help you:
- Make better calculated long-term decisions
- Handle auditing material faster and with greater ease
- Simplify communication between different departments in your organization
- Not miss deadlines and automate renewals
To sum up
Private firms can have their hands full with the transition to ASC 842 leases in trying to be US GAAP compliant and meet other compliance requirements. This guide focused on the core principles of ASC 842 lease accounting and what main challenges may arise as well as dealing with them. A lot of it can be done with proper ASC 842 software. SOFT4Lessee is a solution that’s capable of handling your business’ needs for the transition and after it.