New Lease Accounting Standard (ASC 842) for public companies has been saved
New Lease Accounting Standard (ASC 842) for public companies
Preparing for takeoff
The effective date for the Financial Accounting Standard Board’s new lease accounting standard is almost here. With the effective date on January 1, 2019, right around the corner, what implementation hurdles do publicly-traded companies in the United States still face as they embark on the final sprint?
December 19, 2018
A blog post by Sean Torr, advisory managing director, Deloitte & Touche LLP and James Barker, audit and assurance partner, Deloitte & Touche LLP.
In Deloitte’s October Dbriefs webcast, Public company lease accounting: time for the final sprint, panelists discussed ongoing challenges companies face in preparing for ASC842 as well as considerations on ways to overcome implementation challenges before it goes into effect.
While more than 65 percent of the webcast’s participants stated that they are somewhat, very to extremely prepared for the new standard, many companies are down to the wire and cutting it close as they still have a lot of work to do before the first external
Suggested considerations before liftoff
Here is a preflight checklist of specific components to think about as you prepare for and continue down the path of ASC 842 implementation.
Are systems ready to go?
Make sure that your teams have performed end-to-end testing across the lease ecosystem—including data entry processes, calculations, modifications, transition, reporting, and integrations to upstream and downstream systems.
Is data in check?
Organizations should consider the quality and approval processes to determine whether data is complete and accurate. In our experience, an efficient operating model to maintain and align both lease accounting and operational data is imperative for implementation and beyond.
There are a large number of data elements for a lease that are required to be captured, some of which exist in the lease and some that come from sources outside the lease agreement itself. Data is absolutely critical to getting this right from an accounting perspective.
— Sean Torr, advisory managing director, Deloitte & Touche LLP
Are internal controls in place?
Are internal controls designed and implemented, including such areas as transition accounting; interim solutions, if applicable; ongoing data maintenance; and any other new system-related internal control risks?
Are people prepared?
Making sure that the appropriate resources are available and trained can ease the transition. In addition, clearly established roles and responsibilities can help to increase the efficiency of talent. Organizational resources, such as a help desk, center of excellence, and on-site support, can also help amplify the performance and effectiveness of talent resources.
Are new accounting policies vetted and complete?
Policies around ASC 842 should be ironed out and communicated to stakeholders. Particular consideration should be given to maintenance of accounting policies to keep current with ongoing developments and interpretations.
Are you keeping external stakeholders informed?
The new lease accounting standard is a substantial change for many companies. Regular updates and communications to stakeholders are important to help investors and lenders understand the impact of the new standard.
Adoption of the new lease accounting standard will likely present immediate and ongoing challenges to the operating model, talent resources, accounting policies, new systems, and communications. While many organizations and professionals should be wheels up and ready to go, a final preparations checklist can assist organizations through the transitioning months ahead and into the first reporting deadline.
For further discussions and insights to consider as the new standard takes effect, watch the full Dbriefs webcast, Public company lease accounting: Time for the final sprint.
Following the Dbriefs, listen to the Green Room Podcast episode on the new lease accounting standard for public companies, to gain additional perspective and hear in-depth answers to ongoing questions about the implementation process, experiences with software solutions, new borrowing rates, and more.
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