FASB TO DELAY ASC 842
August 1st, 2019 | News
The accommodation proposed by FASB to allow private companies up to an additional year to comply with the Lease Accounting standards was not unexpected. In their statement to the FASB board, AICPA described lease accounting as “difficult and complex”, and cited the struggles that took place among public companies in complying with the new standards.
While the additional delay may appear to provide some breathing room for private firms, the fact of the matter is that unless they evaluate, acquire, and implement a solution soon, private companies may place themselves in a similarly challenging position.
Significant potential hurdles include:
Data Collection – simply finding all of your lease data and getting it into a standard format can take considerable time.
Training – Accounting staff must be clear on the use of software as well as the interpretation of policies and controls.
Integration – the lease accounting process needs to be integrated into your existing systems to create a reliable monthly close process.
Adoption – as with any significant process change, this will require familiarizing your accounting staff and asset users and owners with the new procedures and structures.
Perhaps most importantly, while compliance initially appeared to simply be a question of applying known calculations and judgments against the data in a lease portfolio, many organizations are now finding is that maintaining the completeness and accuracy of this data moving forward is an extremely complex process of considerable scale. Simply put, the required incremental work they are finding there is revealing itself to require manual workarounds that are expensive and introduce the risk of human error.
We urge firms to carefully evaluate all of their options and to consider the complexities and avoid the manual workarounds that have challenged so many public companies.