Some of the actions required to comply with the new ASC 842 lease accounting standard include:
- Record long-term leases (operating and finance) on the balance sheet
- Consider the reporting requirements such as,
- Disclosing status of impact assessment
- Disclosing assessed impact
- Assess existing leases and service contracts
- Update processes, internal controls, and systems based on new financial reporting requirements
- Assess the potential impact on debt covenants
The burden the standard imposes on organizations with limited accounting resources is significant and challenging. In addition to performing regular abstraction of new leases, modifications or amendments of existing leases, and incremental borrowing rate calculations, an organization must incorporate lease accounting into its financial reporting and disclosures.
Given the complexities of new lease accounting requirements under ASC 842, most companies with more than a handful of leases will also want to leverage lease accounting technology. Managing the initial and ongoing complexity of lease accounting in Excel can increase the risk of errors and overall compliance.
Many companies are deciding to not implement technology or expand internal staffing, but instead utilize RSM to provide Lease Accounting Services (LAS) as a way to ease their on-going burden for compliance. RSM has established a center of excellence to ensure we're providing the best knowledge, insights, technology and tools to help our clients address lease accounting holistically. We have a robust offering that combines people with technical know-how and technology to help any organization succeed.
