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fasb new lease standards

FASB new lease standards implementation: Do's and Don'ts

 
The looming FASB ASC 842, IFRS 16 and GASB compliance deadlines are not the only challenge organizations have when it comes to lease accounting. Many aren't prepared for the sheer volume and level of lease details that the new requirements stipulate. Other organizations haven't looked past the deadline to ensure resources, systems and workflows will be able to efficiently support the lease administration process. Some are turning to lease administration services and lease administration BPO to manage the process.
 
fasb new lease standards

Preparing for FASB

The first step is to plan out the details of implementation and beyond. Here are some “Do's" and “Don'ts" for moving forward.

 

Do:

  • Get educated. The new rules are far more complex than the current ones.
  • Identify a cross-functional team -- accounting, finance, real estate, lease administration, IT, tax, investor relations, legal, internal audit – all relevant stakeholders who are impacted by the new regulations to ensure that all departments are represented and involved.
  • Choose an implementation approach. Do you have the resources to complete the lease abstraction and data entry, or will you need a partner?
  • Have project management resources to assign and oversee the project timeline with key dates, tasks and deadlines.
  • Evaluate tax reporting and accounting impacts – what processes will need to change in the future
  • Develop training on the requirements of the new standard and how it impacts areas of your organization.
  • Understand level of intricacies and level of effort required after the deadline.
  • Look beyond the deadline. Use the implementation to get more robust processes, controls and systems in place for the future: approval, administration and accounting, reporting systems, policies and procedures across the company.

Don't:

  • Underestimate the amount of time and resources you'll need to gather all leases and extract the necessary information to appropriately implement and comply with FASB regulations.
  • Overlook the new levels of detailed information for leases under the new disclosure requirements -- compliance requires lease information that isn't commonly abstracted today.
  • Forget to identify and evaluate any potential embedded leases.
  • Be fooled by the 2019 date. You'll need look-back statements for 2017 and 2018 to be used as comparisons.
  • Forget to identify and separate lease and non-lease components, such as services and maintenance.
  • Neglect to consider differences in ASC 842 and IFRS 16. They are largely converged but key differentiators do exist.
  • Assume your current lease management system will guarantee an easy transition.

What happens if you're not prepared?

Implications of missing the deadline include:

  • Increased costs
  • Rejection by auditors
  • SEC fines
  • Investor lawsuits
  • Fewer available resources

Webinar: How to help ensure compliance

Get more information by watching our webinar: "FASB ASC 842/IFRS 16 Lease accounting coming your way: what your company should know and do to ensure compliance."
Watch the webinar
 

Ongoing FASB compliance support

If you're concerned about not meeting the deadline or worried about what happens when it passes, RICOH Lease Administration Services BPO and lease administration services can help you get the answers you need and guide you through the FASB ASC 842 and IFRS 16 deadline and beyond.