Lease Accounting
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When Lease Accounting Software May Not Be Ideal
While lease accounting software can be highly beneficial for many businesses, there are some types of businesses that might not be good candidates for this software. These include: Sole proprietorships or very small businesses: Businesses with a single owner-operator and minimal or no employees may not have enough leasing activities to justify the cost of…
Which Businesses Benefit Most from Lease Accounting Software?
A company with more than ten active leases must consider a lease accounting solution. The new accounting standard requires more sophisticated financial calculations and detailed monitoring and tracking of leases. Companies will find it extremely challenging to use spreadsheets for lease accounting because of the following limitations of spreadsheets: Lack of ability to track changes: One cannot track changes in spreadsheets. Employees can deliberately or inadvertently overwrite spreadsheet data. Therefore, spreadsheets do not meet internal…
CPAs: Transitioning Clients to the ASC 842 Lease Accounting Standard
Lease accounting has indeed undergone significant changes with the implementation of ASC 842 Lease Accounting Standard, and it is essential for accountants, business owners, and professionals involved in financial reporting to understand and adapt to these changes. The ASC 842 standard was introduced to improve financial transparency and ensure that leases are appropriately reflected on…
Impairment of Leased and Right-of-Use Assets Explained
The recent changes in ASC 842 along with the Coronavirus pandemic have come together to unleash a plethora of chances in how leased assets are treated – not just for the lessee but for the lessor as well. One significant impact of the two happenings is that leases need to be recorded as a liability and a…
COVID-19's Impact on Lease Accounting Under ASC 842
As the world continues to grapple with an invisible enemy, our daily lives aren’t all that have been impacted. Companies as a whole have been unable to collect or pay rent on their leased assets, while the changes in ASC 842 have meant that lease accountants all over the globe following GAAP have had to go through their books thoroughly…
ASC 842: Spotting Embedded Leases in Contracts
We previously discussed how FASB had discussed changes in ASC 842: Lease Accounting in Rate Implicit in the lease as well as the determination of IBR. The board has also outlined the concern presented by some preparers about the identification of leases embedded within a contract. The main issue was that entities spent significant amounts of time trying to identify and account…
ASC 842: Implicit Rate vs. IBR for Lessees
In a previous post, we discussed how FASB is finalizing a change in ASC 842: Lease Accounting. As it stands, the change is set to impact every business that adopts GAAP to settle their books. FASB had been releasing updates every now and then to ensure that the new changes are well understood and implemented by the effective date. Although…
ASC 842: Selecting the Best Incremental Borrowing Rate
The problem of determining the rate implicit in a lease also presented a concern that most preparers used the incremental borrowing rate (IBR) as the discount rate. However, that wasn’t the only concern that came to light during FASB’s roundtable in September 2020. Apart from the rate implicit, members also discussed the IBR; i.e., how those that have adopted ASC 842 determine the IBR. It…
Private Companies Transitioning to the New FASB ASC 842 Standard
The experiences of public companies in transitioning to the ASC 842 lease accounting standard have underscored the complexities and potential pitfalls of the process. These lessons learned are invaluable for private companies, who must heed these insights as they approach their own compliance deadline at the close of 2020. Among the key challenges faced by…
Lease Accounting Standard: Key Implementation Challenges
A survey on the impact of the new lease accounting standard (as it pertains to lessees) was recently completed and its results validated some of the feedback that we have been providing over the last few years about how organizations are responding to the new change and major pain points that must be addressed as…
ASC 842 Lease Standard: Understanding Executory Costs
One of the areas of the new lease standard that has not received that much attention is executory costs. However, as lessees consummate new leases that must be transitioned into the new standard, this is an area that should not be overlooked. Executory Costs that Transfer a Good or Service The new lease standard only…
ASC 842 Lease Accounting Standards & Technology Requirements
Earlier this week, I participated on a webinar on the new lease accounting standards. The webinar was given by one of the major accounting firms and was specifically directed at how the new lease standards will impact lessees. One of the polling questions asked of participants during the course of the webinar was whether, in…
Implementing the New Lease Accounting Standard: A Guide
Leases (Topic 842) was issued by the Financial Accounting Standards Board (“FASB”) in February 2016 and represented a rather substantial change in how leases are to be accounted for, especially for lessees. More than 30 months have gone by and the effective date to implement the new standard is fast approaching. The effective date for…
Transition Options for Lease Accounting Standards
The Financial Accounting Standards Board (FASB) has recently taken a significant step in easing the transition to the new lease accounting standard by issuing a proposed Accounting Standards Update (ASU). This proposal offers organizations an additional transition option, which could prove to be a welcome relief for many in the business community. Under this proposed…
Understanding Financial Reporting Disclosures in ASC 842
There has been much focus on the specific calculations required to comply with the proposed leasing standards. However, with the final standard expected to be issued in the fourth quarter of this year, financial statement preparers should also focus on the proposed disclosure requirements. The Financial Accounting Standards Board (“FASB”) and the International Accounting Standards…
ASC 842: Defining a Lease Simplified
The Financial Accounting Standards Board (“FASB”) and the International Accounting Standards Board (“IASB”) (collectively, “the Boards”) met earlier this week to continue their deliberations on the Joint Lease Accounting Project. The meeting focused specifically on the definition of a lease and the Boards reiterated the conclusions that they had reached in their Joint Meeting in…
CPA Alert: Tackle Lease Accounting Changes Now
Have you started thinking about how the Lease Accounting changes will impact your clients? We hope so!! We’ve written this free whitepaper for you, a CPA with real-world responsibility to your clients. This whitepaper has been written specifically for you as a CPA to help you better understand the opportunities available for you to add…
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