Lease accounting (ASC 842) for private companies has been saved
Lease accounting (ASC 842) for private companies
Lessons learned from public company implementations
Public companies have been working to comply with the new standard on lease accounting since the beginning of 2019. Analysis of their preparation successes and challenges provides critical ASC 842 lessons for private companies approaching a 2021 deadline. Explore the five lessons learned we’ve observed.
- Public knowledge, private lessons
- Five lessons learned
- Smoothing out the road ahead
- Get in touch
- Join the conversation
Public knowledge, private lessons
For public companies, January 2019 marked a turning point. It was then that Accounting Standards Codification (ASC) Topic 842, the Financial Accounting Standards Board’s (FASB’s) new standard on accounting for leases, took effect for public companies with calendar year-ends. It could bring some $3 trillion of lease liabilities onto publicly traded company balance sheets.
ASC 842 changes the way companies across all industries account for their leases and provides investors with a clearer picture of what companies owe through their lease obligations, including those for equipment and real estate. And in 2021, the rule goes into effect for most private companies as well.
This gives private companies an opportunity to learn from their counterparts in the public realm. What did earlier adopters do to prepare? And what stumbling blocks did they encounter along the way? Here are five ASC 842 lessons for private companies to help prepare for the first major FASB lease accounting changes in nearly 40 years.
Five lessons learned
Smoothing out the road ahead
ASC 842 dramatically increases the number of leases that companies may need to record on their balance sheets. The standard will likely have far-reaching implications, affecting areas such as accounting, real estate, legal, procurement, and technology. But companies needn’t start from scratch. ASC 842 lessons for private companies can be learned from their counterparts in the public arena, pointing out potential pitfalls and turning compliance into an ongoing advantage.
The services described herein are illustrative in nature and are intended to demonstrate our experience and capabilities in these areas, however due to independence restrictions that may apply to audit clients (including affiliates) of Deloitte & Touche LLP, we may be unable to provide certain services based on individual facts and circumstances.
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. In the United States, Deloitte refers to one or more of the US member firms of DTTL, their related entities that operate using the "Deloitte" name in the United States and their respective affiliates. Certain services may not be available to attest clients under the rules and regulations of public accounting. Please see www.deloitte.com/about for a more detailed description of DTTL and its member firms.