By Joel Hess on May 27, 2022 at 8:00 AM
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.
Who does what?
As you’re discussing the new lease standard with your clients, you’ve probably realized that many of them don’t have the capacity to handle the work of an implementation, or may simply want your guidance as they do.
Generally speaking, you can assist clients with explaining the lease standard, how to make policy decisions, how to conduct a lease audit, how to transition leases on the books and other key details. Similar to the work you may provide for fixed asset and depreciation schedules, you can even input data for them when they don’t have the resources to do this work themselves.
Most importantly, the client must make final decisions and assert to the accuracy of any data elements that drive journal entries and footnote disclosures.
- For example, that means you can explain the pros and cons of various policy options, with your client making the decisions themselves around the policies they adopt and practical expedients they elect. Your firm can then review those decisions and offer additional insights, but the final decision must remain with your client.
- Or, if a client has a 10-year lease with a 5-year renewal option, you might provide guidance on the required analysis to determine whether they are reasonably certain they will exercise the renewal option and, as a result, include it on their financial statements. It is your client who ultimately determines if an economic incentive exists to include a renewal option in the lease term. You then review whether their decision-making process complies with the new lease standard as part of your assurance work.
Choosing the right software
The right software can make all the difference. (Hopefully you’re planning to use software to implement the new standard, as doing it manually with spreadsheets is quite risky.)
First of all, you need to make sure any software you use complies with AICPA guidelines on hosting services independence.
Next, look for software that makes it easy for a client to verify the accuracy of data inputs. For example, LeaseCrunch® provides a simple report showing all lease data entered into the system, so the CPA firm can provide that report to the client and management can assert that the report is accurate.
Questions about the new lease standard? Want to learn more about LeaseCrunch® and how it can help simplify the new lease standard for you and your clients? Schedule a free consultation with one of our experts today!