A Repeatable ASC 842 Process for CPA Firms With Many Small Lease Portfolios

A CPA firm can run ASC 842 across many small clients by using one process for all of them. That means a clear split of who decides what, a standard file for each client, a set calendar, and an independence check for any attest client. Trouble often starts when each client's leases live in a separate spreadsheet that only one staff member understands.

Start with who decides what

Most lease problems at small clients begin as a misunderstanding about ownership. The client assumes the firm will find out about the new copier lease. The firm assumes the client will send it. Put the split in the engagement letter.

Keep this table the same across clients where you can. Exceptions are fine, as long as they are written down.

Keep a standard file for every client

When a staff member changes or a client's auditor calls, the file should answer the question without a meeting. Hold these items in the same place for each client:

• Lease list: every real estate and equipment lease, with the contract and any amendments.
• Completeness check: how you compared the list against rent and equipment expense and the client's contracts.
• Policy elections: for example the short-term lease exemption (ASC 842-20-25-2) and the election not to separate lease and nonlease components (ASC 842-10-15-37). Entities that are not public business entities also have the risk-free rate election (ASC 842-20-30-3).
• Classification support: the answer to each of the five tests for each lease (ASC 842-10-25-2).
• Discount rate support: the rate used for each lease and where it came from.
• Reconciliation: the most recent tie-out of the lease balances to the general ledger.

The elections deserve particular care, because each applies to a whole class of underlying asset rather than one lease. A note that says "client elected this, on this date, after this conversation" saves a long reconstruction later.

Run the same calendar for everyone

Lease accounting at a small client does not need much time, but it needs regular time. A simple rhythm works:

• Each close the client's engagement covers: ask whether any lease was signed, amended, renewed or ended. Post the entries and tie out the balances.
• Each quarter: review upcoming renewal and option dates with the client. Electing to exercise an option, or not to, can change the lease term when that differs from the earlier assessment. So can a significant event within the client's control, such as major leasehold improvements (ASC 842-10-35-1).
• Before year-end: scan the expense accounts for lease-like payments and service contracts that may contain a lease.
• At year-end: produce the rollforward, the maturity analysis and the footnote data, and collect the client's sign-off.

A client asked this question on a schedule tends to answer it. A client who is expected to remember tends not to. For what a client should expect at the start, see how implementation works for a CPA firm's clients.

Check independence before taking on attest clients

If your firm audits or reviews a client's statements, or compiles them without disclosing a lack of independence, lease work for that client is a nonattest service. The AICPA Code of Professional Conduct addresses these services in its Nonattest Services interpretations (ET sec. 1.295).

This section is a starting point rather than a conclusion. Read the Code and your state board's rules against the facts, and ask your firm's ethics resource when in doubt.

Three questions usually matter:

• Who takes responsibility? The general requirements (ET sec. 1.295.040) call for the client to assume all management responsibilities, evaluate the adequacy and results of the service, and accept responsibility for the results. Management must also oversee the service through someone with suitable skill, knowledge, and experience. A client who cannot explain the lease numbers is a warning sign.
• Is the understanding documented? The firm should document the objectives, the services and each side's responsibilities with the attest client before performing the work.
• Who holds the records? The AICPA's hosting services interpretation (ET sec. 1.295.143) treats a firm that takes custody of an attest client's data or records, so that the client would need to come back to the firm to make them complete, as impairing independence. Do not let the firm become the only route to the lease file. A client with its own access and the ability to export its data is in a stronger position.

The firm's attest team should also consider how it will audit balances the firm's own staff helped calculate. Settle that before the engagement, not during fieldwork.

Where software helps, and where it does not

The real gain from one system is consistency: the same method, the same reports and the same file structure for every client. Software does not find a client's unsent lease, and it does not make the client's judgments for them.

iLeasePro supports this with multi-client account linking, which lets a firm move across client accounts at the click of a button. Every plan includes unlimited users, so the client's team and your firm can work from the same data, and customers can export their data at any time. The Advisor Program for CPA and accounting firms covers firms supporting clients with smaller portfolios.

When a client's auditor asks about the system, the 2026 SOC 1 Type 2 report is available to customers and their auditors. The client's own controls still matter, and our guide to complementary user entity controls explains which ones remain with the client.

Sources and further reading

• Catherine R. Allen, CPA, How data hosting services affect independence, Journal of Accountancy, January 2018. The effective date later moved to July 1, 2019; see Independence interpretation on hosting services gets new effective date, Journal of Accountancy, August 2018.
• AICPA, Plain English Guide to Independence.
• AICPA Code of Professional Conduct, Nonattest Services interpretations, ET sec. 1.295.
• Deloitte, Roadmap: Leases.

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