The 3 Paths to ASC 842 Compliance
Authored by RSM US LLP
Given the complexities of new lease accounting requirements under ASC 842, most companies with more than a handful of leases will 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. For example, an organization with as little as 20 leases may need to manage thousands of fields, hundreds of calculations and have issues with modifications.
Depending on the current and future circumstances surrounding your organization and your lease portfolio, the path to compliance may vary.
Some of the key factors for selecting your path forward include:
- The number of leases in your lease portfolio as well as the dynamic nature and complexity of your leases
- Economic value and overall materiality of your leases
- Your existing level of technical accounting expertise and knowledge of lease accounting
- Capacity of resources within your organization for initial adoption and ongoing lease accounting
- Your existing technology environment and solutions to support lease accounting requirements
Which path is right for you?
- Speed to compliance
- Leverage proven standard configurations and processes
- Cost of implementing technology to be compliant
- Choose when to optimize your configuration and processes
- Potentially additional staff required
- Using predefined structure and reporting
How to select: Interview prospective partners, understand services for training, testing and optimization, review template database and evaluate sample deliverables.
If you have a small lease portfolio, RSM Lease Accounting powered by LeaseQuery is a cloud based solution that provides the functionality you need to help meet the requirements of the ASC 842 and IFRS 16 lease standard. This solution offers robust lease accounting functionality and provides journal entries and financial disclosures required for ASC 842 and IFRS 16
Select and implement a technology that is configured specifically for your organization and develop internal capabilities for ongoing lease accounting and lease management.
- Designed system to all of your required processes starting day one
- Optimized at go-live
- Enhanced ability for management of lease portfolio and economics
- Potentially additional staff required
- Additional software to maintain within organization
- Manage updates and system changes
How to select: Interview prospective partners, review implementation methodology and evaluate sample deliverables. Also, consider post-implementation managed services or support services to ease the burden of ongoing lease accounting changes and updates.
Rather than implementing in-house, leverage Hayashi Wayland and RSM for providing a proven technology platform, accounting experience and support for ongoing lease accounting compliance and reporting.
- Speed to compliance
- Stay current on changes without heavy internal lifting
- Compliance without purchasing or subscribing to additional software
- Additional accounting staff will not be required
- Focus on core accounting
- May not accommodate customized requirements to the extent of a full software implementation
- Standard practice accounting elections may result in larger balance sheet impact
- Lack of your control over software configuration
How to select: Interview prospective partners. Understand their level of services and approach. Evaluate sample deliverables. Also, consider post-implementation managed services or support services to ease the burden of ongoing lease accounting changes and updates.
Please contact the Hayashi Wayland partner or team member you work with for assistance or with any questions you may have.
View the Lease Accounting Resource Center: Insights to help you navigate the ASC 842 reporting requirements.
This article was written by RSM US LLP and originally appeared on 2021-05-19.
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