As a CPA, you know the importance of maintaining independence while working with your clients. At the same time, your clients rely on you for expertise and assistance, particularly with new accounting standards. With this, I’m hearing a recurring theme around the new lease standard: How can I, as a CPA firm, help my clients implement the new standard while remaining independent?
Each firm has to make their own decision on whether their processes allow them to maintain their independence, but we’ll provide some considerations to keep in mind in this blog.
The objective of the footnote disclosure is to enable users of financial statements to assess the amount and timing of cash flows arising from leases.
Under the previous lease standard, ASC 840, these disclosures were primarily limited to a maturity schedule that showed each of the next five years’ committed payments, with further payments lumped together. Further, there was no discount rate applied, it was just the payments themselves. For many organizations, it meant that lease disclosures were fairly easy to handle with a spreadsheet.
The new lease standard increases the scope and complexity of the financial statement footnote disclosure with additional requirements for both quantitative and qualitative disclosures. Handling these disclosures with a spreadsheet has become far more difficult than before.
When a CPA firm attests to the accuracy of a client’s financial statements, maintaining their
independence is important to assure that they have not been unduly influenced to deliberately
or inadvertently participate in misstating published financial statements.
With the advent of new technologies, there are new factors for CPA firms to consider and the
AICPA has developed hosting services guidelines to assist in this effort.