Have you spoken with your clients about the new lease standard? How many clients have begun preparing for implementation? Since the new lease standard doesn’t go into effect for another year for non-public organizations and most are still dealing with the new revenue recognition standard, we’re hearing that many haven’t put much effort into preparing for the new lease standard.
Given the time-consuming nature of implementing the new lease standard, it’s essential that any client with leases considers developing an implementation plan sooner rather than later. Because your firm will be more frequently interacting with clients in the next few months, it’s a perfect time to bring the new lease standard into the conversation.
In this blog, we’ll offer suggestions for having these discussions in conjunction with your assurance work to help you best prepare your clients for this significant change.
Audit planning meeting
During your first audit planning meeting with clients, be sure to discuss the lease standard at a high level, to make sure clients are educated and understand the potential impact. If you’ve already conducted this meeting, incorporate these suggestions into your next client visit.
Start by explaining the new lease standard, including timelines and the potential impact it will have on the client’s organization. Be sure to emphasize the importance of preparing for it now, as implementation will be a lengthy, complex process. To get started, encourage them to assess the size of their lease portfolio, along with the completeness of their access to lease documents for assessment.
In addition to discussing with the client, consider providing a quick resource guide (like this one) as a leave-behind reference.
Audit prelim / interim fieldwork
Use this visit to check in on your client’s understanding of and preparation for the new lease standard. Hopefully, by now, they’ve taken some introductory steps toward implementation, or are at least planning to in the near future. Double check specifically if they have a clear understanding of the size of their lease portfolio (as well as what qualifies as a lease).
You may want to provide your client with a preparation checklist to guide them through the next steps of implementing the new standard. Your clients may also benefit from these office space and vehicle lease checklists to simplify the process of reviewing existing leases.
Now that you’ve moved into 2019, your clients should be further along preparing for the new standard. This is a good opportunity to dig into more of the details that go along with implementing the new lease standard and provide some hands-on guidance.
Start by checking in on their preparations and answering any questions they have for you. Then we recommend reviewing their lease portfolio listings and checking for completeness against lease expenses and other contract expenses. This is not an audit finding, but can be instrumental in helping clients understand the scope and resources required to implement the new lease standard.
Since you’re meeting with your client’s management team and/or Board, take this opportunity to discuss the new lease standard and the preparations that are underway for implementation. Share your assessment of the client’s readiness, along with any potential gaps that will need to be addressed before implementing the new standard.
Consider strategies to continue providing value to clients around the new lease standard and make yourself a resource to assist with implementation. For instance, you could write thought leadership blogs on the new standard, hold in-person trainings or webinars, or send periodic email tips and reminders.
Don’t forget to grab these resources to share with clients: