A Guide to the ASC 842 for Transportation Companies

The ASC 842 lease accounting standard requires that all transportation-related leases—whether for vehicles, equipment, or facilities—be recorded on the company’s balance sheet. This major shift aims to increase transparency and provide a more accurate picture of a company’s lease obligations.

Key Impacts
Balance Sheet Recognition: Records all operating leases as assets and liabilities, affecting your financial ratios and indebtedness.
Transparency and Disclosure: Improves financial disclosure, giving stakeholders a clearer understanding of your leasing obligations.

Follow these steps to ensure compliance to the ASC 842 Lease Accounting Standard;

1. Comprehensive Lease Identification

Abstract and document all existing leases, including informal agreements, across all company divisions.

Support from Lease Management Features: A robust lease management system like iLeasePro centralizes lease data, ensuring no lease is overlooked and compliance is seamless.

2. Accurate Lease Classification

Analyze each lease to determine if it should be classified as operating or finance under ASC 842.

Support from Lease Classification Features: Advanced lease classification tools, like the iLeasePro Classification Wizard, assess terms and payment schedules to automate classification, reducing errors and manual work.

3. Precise Measurement of Lease Transactions

Calculate the present value of future lease payments to determine your right-to-use asset and liability.

Support from Lease Management Features: Automate calculations using the correct discount rate, and maintain accurate, real-time records of these values. iLeasePro automatically creates the amortization scheduled and journal entries to comply to the ASC 842.

4. Selection of Transition Method

Choose between full retrospective or modified retrospective approaches to transition to ASC 842.

Support from Lease Analysis Features: Evaluate the impact of each transition method on past and future financials using scenario analysis tools, facilitating informed decision-making.

5. Detailed and Transparent Disclosures

Create disclosures that include both qualitative and quantitative details of your leasing activities. Support from Lease Management Features: Generate comprehensive financial reports that fulfill disclosure requirements and provide insights into leasing strategies and impacts.

Let iLeasePro Help You in Your Lease Accounting Journey

Navigating ASC 842 compliance is a substantial but manageable task for transportation companies, especially with the right tools and strategies in place. By integrating structured lease management and comprehensive lease analysis via iLeasePro, your company can not only meet compliance requirements efficiently but also gain strategic advantages through enhanced lease portfolio management. Implement these steps to streamline your processes, pass audits confidently, and unlock financial improvements.

To do this, call us at 888-351-4606, or you can email us at info@ileasepro.com We also have plenty of great information about lease accounting software on our website, which is ileasepro.com, and you can chat with a live representative there as well.