Nearly a decade after issuing ASC 842, the Financial Accounting Standards Board (FASB) has wrapped key parts of its post-implementation review (PIR). The headline: while investors broadly support the transparency gains from recognizing operating leases on the balance sheet, companies reported that both initial implementation and ongoing application costs were higher than expected.
This aligns with what many finance teams experienced: new systems, new processes, and heavier data requirements. Below, we summarize the major takeaways and outline practical steps to reduce the recurring cost of compliance.
Key Findings From the Review
- Transparency goal achieved: Balance sheet recognition of operating leases provides investors a clearer view of obligations and risk exposure.
- Costs ran higher than modeled: Organizations needed to overhaul workflows and tooling, driving significantly higher implementation and ongoing application costs than initially anticipated.
- No fundamental overhaul planned: Despite cost concerns, feedback to date doesn’t indicate a need for sweeping changes to the core model of the standard.
- Lesson learned on cost-benefit: Policymakers noted that assumptions around cost saving (e.g., from the dual-model approach) didn’t always play out in practice—an important input for future standard-setting.
Source: CFO Dive coverage of FASB’s PIR.
Why Costs Escalated for Many Teams
- Data discovery and cleanup: Centralizing lease data and supporting documents across real estate and equipment portfolios took longer than planned.
- Policy and judgment documentation: Establishing methodologies (e.g., IBR vs. risk-free rate), option assessments, and classification decisions added time and review cycles.
- Change management: Ongoing modifications, CPI resets, and remeasurements require durable processes—not just a one-time implementation project.
Action Plan: Reduce the Ongoing Burden of ASC 842
- Standardize the discount rate playbook. Maintain a dated, approved IBR methodology and archive rate sources to avoid one-off decisions. See: How to Calculate the Incremental Borrowing Rate.
- Automate modification and CPI workflows. Use software with reminder calendars, approvals, and remeasurement logs so changes are captured once and flow through disclosures.
- Tighten embedded-lease reviews. Run periodic scans of service contracts (IT, logistics, dedicated equipment) and document outcomes. Guide: Identifying Embedded Leases.
- Centralize documents and evidence. Link executed agreements, amendments, and CPI support directly to each lease record to speed audits.
- Generate roll-forwards that tie out. Produce automated ROU/lease liability roll-forwards and reconcile to the GL to reduce review cycles.
What This Means for CFOs
ASC 842’s transparency benefits are here to stay, but so are the operational demands. The path to lowering total cost of ownership isn’t policy change—it’s process and platform. Teams that move beyond spreadsheets and ad-hoc procedures can shrink close timelines, cut error risk, and make audits more predictable.
How iLeasePro Helps
- Single source of truth: Centralized lease registry with contract-to-record linking and full search.
- Built-in remeasurement workflows: Approvals, date tracking, and automated calculations for modifications and CPI resets.
- Consistent rates and policies: Apply IBR policies uniformly across entities and asset classes.
- Audit-ready outputs: Disclosure reports, roll-forwards, and exportable audit logs that tie to the GL.
Bottom Line
FASB’s PIR underscores a reality most finance teams already know: compliance under ASC 842 was costlier than expected. The good news is that the ongoing effort can be controlled. By standardizing judgments, automating modifications, and centralizing evidence, you’ll turn a recurring compliance headache into a stable, auditable process.
Want to lower your ASC 842 run-rate? See how iLeasePro streamlines compliance and audits. Book a demo below!
