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Maintain Independence while Implementing the New Lease Standard

LeaseCrunch Helps CPA Firms Maintain Independence while Implementing the New Lease Standard

The AICPA guidance around maintaining independence is tightening. With this comes heightened awareness from CPA firms to ensure they are providing expertise and value to their clients while also staying independent. While each firm makes its own determination when it comes to independence, there are some considerations to keep in mind, especially if software is going to be used for lease accounting. 


Client Data and Hosting Standards for CPA Firms

In order to maintain independence with the AICPA hosting standards, CPA firms cannot continuously host client data on the client’s behalf. This includes hosting a client’s website, storing financial information, or serving as a business continuity provider. Firms can retain their own work product or copies of client data that supports their work product. In addition, any original data that the client sent to the firm must be returned once the work is completed, or annually for long-term engagements.

LeaseCrunch helps firms adhere to the AICPA hosting standards by LeaseCrunch serving as the hosting provider. We store the information so that firms don’t have to worry about whether they are compliant with the hosting standards. Further underscoring this independence, the client can remove the CPA firm’s access to client lease data and can transition from one CPA firm to another, if needed.


Who Does the Work?

The easiest way to demonstrate independence is for a CPA firm to invite their client to enter their data directly into LeaseCrunch.

From a practical standpoint, many clients do not have the resources or expertise to analyze leases and enter the data into LeaseCrunch. The next best option is outsourcing the work to another firm.

When bringing in a separate firm to do the work isn’t practical, a firm has the option of assisting the client with data entry. When this happens, firms can have each lease go into a Review status and the client is then responsible to confirm and assert to the accuracy of the data inputs. Alternatively, some firms run the LeaseCrunch report containing all inputs and management formally asserts to the accuracy of those inputs.

The LeaseCrunch audit trails are helpful throughout this process to clarify who entered what information. 


CPA Firm Independence, Calculations and Accuracy

Implementing the new lease standard manually with spreadsheets is quite risky. In addition, if a firm provides a lease-calculation spreadsheet to a client, the firm essentially performs the calculations for the client. Spreadsheets complicate a firm’s ability to maintain independence. 

Not only does LeaseCrunch produce journal entries, amortization schedules, and quantitative footnote disclosures with the push of a button, our accuracy and security protocols have been scrutinized through our SOC 1 Type II and SOC 2 Type II reports along with an agreed-upon procedures (AUP) report for our calculations.

We also allow firms’ clients to have their own access to the system on an ongoing basis. They can directly maintain their leases and know that it’s secure and accurate. 


Save Time with LeaseCrunch

The most time-consuming aspect of implementing the new lease standard is locating all agreements and extracting the proper information out of lease documents. Once this is completed, many accountants will simply calculate the lease liability and right-of-use (ROU) asset on a spreadsheet.


While spreadsheets seem easy, we have seen three ways they waste a significant amount of time. 

  1. Time is wasted creating formulas for leases that existed before implementation and then adjusting those calculations for new leases after implementation. 
  2. The new lease standard requires extensive quantitative disclosures at year end, including the weighted average discount rate and weighted average remaining term. Accountants have spent days creating accurate disclosure formulas for even a handful of leases. 
  3. Lease modifications require calculations to change on a go-forward basis from a decision date, which is difficult to do accurately in a spreadsheet.

LeaseCrunch can be deployed and running in a day. It maintains accuracy even as lease inputs change. With LeaseCrunch’s step-by-step wizards, worry-free calculations and automated quantitative footnote disclosures, firms can be confident that they are maintaining their independence while their clients are complying with the requirements of the new lease standard.

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