Case Study

RSM helps expedite restaurant group's 842 implementation

Past deadline, client gets back on lease accounting track

Aug 12, 2019
Technical accounting Restaurant

Reviewed and verified August 12, 2021


A publicly traded hospitality leader operating high-end restaurants and lounges in the United States and internationally was introduced to RSM by a mutual business contact. Following the introduction, RSM submitted a proposal to do the annual audit for the restaurant group. Although the company ultimately selected a smaller firm, the RSM team kept in contact through direct outreach as well as at industry conferences, such as the Restaurant Finance and Development Conference.

In early 2019, the restaurant group’s CEO, who had previously worked with a leader in RSM’s restaurant industry practice, reached out to the firm for assistance with its implementation of ASC 842, the new lease accounting standard from the Financial Accounting Standards Board. The restaurant business was anxious about implementation since the Jan. 1, 2019 filing deadline for public companies had passed.


The RSM team met with the client to understand the current situation and needs. It was determined that the restaurant group had 16 real estate leases. Due to that relatively low number, they decided not to leverage a software system as part of the implementation strategy. The engagement involved the following multistep process:

  • Lease abstraction, which included leveraging RSM’s outsourced team, RSM Delivery Center (RDC), to assist with the process. RDC resourced abstracted lease data into an Excel template which performed the requisite ASC 842 calculations and provided data for journal entries for each respective lease (absent reassessment and remeasurement considerations).
  • Data and information validation, which was used to complete calculations for the 10-K disclosure and first quarter financial statements.
  • Equipment leases evaluations, which ended up being deemed immaterial.
  • Embedded lease analysis, which ultimately determined the company did not have any material embedded lease contracts.
  • Development of transition accounting and go-forward accounting policy elections and memos.


Upon completion of the ASC 842 implementation, there were several key takeaways and successful outcomes including:

  • Not all lease accounting implementations are alike and many may not involve a software solution. For this client, with only 16 leases, using Excel was the best solution for the company.  Regardless of whether a company uses a separate ASC 842 software solution or simply uses Excel, the process of gathering leases, abstracting data and implementing the solution appropriately with ASC 842 accounting requirements can be time consuming. It’s important to understand the quantity of leases and their complexity before embarking on an implementation strategy.
  • The controller and other staff were a capable group and committed to the 842 implementation project; this enabled an expedient timeline. In addition, the client was eager to work with the RSM team. This willingness to engage and work collaboratively advanced the project. If a client is not prepared, it could become a much more challenging project, delaying implementation and exposing the organization to noncompliance measures and business interruption.
  • The leases were readily available and organized by the client; this allowed for the efficiency mentioned above.
  • Fees for lease accounting implementation can be very significant. Depending on the number of leases, however, they can be managed as seen with this particular client. For private companies, there may also be additional opportunities to minimize implementation services and fees.

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