If your company has yet to develop an implementation plan for the ASC 842 leasing standard, they this should be done as soon as possible. The standard is in effect for companies with a period that begins after December of 2019. Once implemented, the standard requires operating leases to be displayed directly on the balancing sheet as a lease liability. In the past, the operating leases were simply displayed in the footnotes. You will be able to learn more by reviewing the following information.
There are exceptions
Exceptions include some short-term leases. Also, if your company enters into very few lease contracts, then the changes with regards to your record keeping won't be much. It's when you have many contracts for leases that you will be impacted.
There are things to keep in mind
Once your business switches to meet the needs of the new standard, you will want to keep some things in mind.
The lease will become more important once the requirement to display leases on the balance sheet has gone into effect. One of the things that won't be changed much is the income statement portion of lease reporting. Once the business is required to display the leases on their balance sheets, they may also need impairment testing.
Your business may find that keeping a lease accounting ledger to record all entries will be helpful and in some cases it may even be necessary. This will allow for the ease of keeping such information as payment and liability amortization schedules. Changes to these schedules would need to be maintained and modified to reflect changes that occur on a regular basis. These changes would include any lease renewals.
How changes can affect things
The new standard and all the changes that come with it can make it harder for a business to continue the management of their current portfolios through the use of spreadsheets altogether. Since spreadsheets have always been thought of as the go-to method for this type of recording, switching to a new method can be difficult and confusing.
Business's may find that centralizing and integrating their lease management services may simplify the process for the future. Also, their outdated manual methods should be converted to an automated practice which will be more efficient and help make the process go smoothly.
There is help available
If your business is having a difficult time integrating the new standards into your program, then you can hire a consultant who can help you with such tasks as creating a project plan, coming up with a lease policy and process, and checking over your software to make sure it is sufficient for your needs.
Contact a company, like Horizon Projects Consulting, for more help.