Thoughts on Leveraging Accounting
For privately-owned companies December 15, 2021 is an important date and it is right around the corner.
That is the deadline for implementing Accounting Standards Codification (ASC) 842 Leases. Prepare now.
Effective implementation of a new accounting standard requires a strategic project plan. The lease standard is one of the more complicated standards issued in recent years so proper planning becomes even more important. Start by identifying a team member with sufficient knowledge and authority to lead the project to completion. From there, a preliminary review of the extent of the company’s leasing activities should be done. Be sure to consider both finance leases and operating leases when doing this preliminary review. This will allow for an assessment of the scope required for implementation and will enable the company to begin talking with firms that can provide outside support during this process. Analyzing and reviewing lease documents can take considerable time and requires a solid understanding of the new standard. Many companies simply do not have the internal resources with the available time and knowledge, so it is important to engage a service provider early in the process. Finally, establish internal protocols to govern the project. Require regular reporting from the project lead to management on the status and prepare to retain sufficient documentation to support the company’s implementation decisions. Start the process now to reduce the overall time requirement and ensure a smooth implementation!