Many companies have a list of questions for FASB regarding its new ASC 842 lease accounting standard.
The Financial Accounting Standards Board (FASB) and advisers report a significant uptick in questions regarding the new ASC 842 lease accounting standard as companies delve into details regarding leases that need to be added to their balance sheets. Among the most popular questions include “what exactly is a lease?”
According to Compliance Week, the companies generating the most questions regarding new lease accounting guidelines are the largest companies that will be most affected by the change. In particular, companies whose real estate leases are vital to company operations, such as big retailers and global decentralized organizations.
The increased volume of questions makes sense, as a recent survey reported more than one third of respondents are only “somewhat prepared” to comply with the new lease accounting standards. More than 25 percent are “Not too prepared” and almost 10 percent are “Not prepared at all.”
As companies of all sizes sift through lease agreements of all types and put processes and controls in place to ensure compliance, it is anticipated that the demand for a streamlined, centralized IT solution will also increase. To avoid errors resulting from disjointed data housed in separate software programs, it is recommended that companies get a global view of all lease data by consolidating lease obligations – including real estate, equipment, fleet and other leases – into one centralized system. Benefits include uniform processes for data entry and record-keeping, which leads to overall higher quality of data, reliability and successful compliance.