The FASB’s decision to delay implementation of the new lease standard by one year for private companies brought some needed relief. At the same time, it’s important that private organizations not get complacent, as there are many reasons the new lease standard should still be top of mind.
We’ll discuss 7 of those reasons in this blog, largely focused around myths and misconceptions my team and I have been hearing since the delay was first announced. CPA firms can use these as talking points with your clients when discussing their preparation for the new lease standard.
As we all expected, the Financial Accounting Standards Board (FASB) voted today that the new lease accounting standard will be delayed for one year for non-public companies. The decision comes three months after FASB proposed the delay for this and several other major accounting standards.
As discussion and concern around implementing the new lease standard increased this year, there was much to be said about the readiness (or lack thereof) of lease accounting software solutions. In fact, this may have been a contributing factor in the FASB’s likely implementation delay for private companies.
The importance of accuracy when implementing the new lease standard is critical, so we absolutely understand the unease—particularly since we know all the risks associated with using spreadsheets. That’s why it was so important to us at LeaseCrunch® to go above and beyond to have a third party evaluate and test the inputs, calculations, and reporting outputs of our software, with our Agreed Upon Procedures report.
On July 30, 2018, the FASB issued a greatly anticipated ASU related to the new lease standard. ASU 2018-11, Leases (Topic 842), Targeted Improvements, has two provisions that are intended to make transition to the new lease standard easier and less costly. One is an additional transition method, providing transition relief that will be of great interest to lessees and lessors. The other provides a new practical expedient for lessors in their identification and separation of lease components.
The new lease standard, ASC 842, changes the treatment of common area maintenance (CAM) within a real estate lease contract. Many real estate leases include some form of CAM, such as cleaning a building lobby, snow removal, landscaping, or janitorial services. Here are some things you need to know about CAM, including what is changing and a few practical examples.
Policy elections that must be made under the new lease accounting standard are a critical part of implementation planning. They impact your clients’ future accounting and financial statement disclosures and your clients may not have even considered them yet. For example: