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.
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.
Implementing the new lease standard is complex, particularly for organizations with many leases. Beyond the complexity and time-consuming nature of implementing the new standard, setting it up manually with spreadsheets is also extremely risky. This blog will examine the advantages of using software instead.
Important note: This is a judgment-based standard, which means there are few hard-and-fast rules and the treatment of your leases will depend on your unique situation. It's important that you always double-check decisions with an accounting professional who knows your circumstances. This blog should not be considered, or take the place of, professional advice or services.
This month, we’re bringing back industry expert John Hepp to discuss related party leases. John is a retired partner from Grant Thornton and a former FASB project manager. He holds a PhD from the University of Wisconsin-Madison and is currently on the faculty at the University of Illinois at Urbana-Champaign.
With John’s help, this blog will examine leases between related parties, specifically the lease term that should be booked.
As we kick off 2019, everyone posts predictions for the coming year and I enjoy reading those as much as the next person. With the new lease standard, it seems that predictions are more along the lines of, “the sky is falling!” There are only so many times we can hear that we’re in dire straits, so I thought I’d shake it up a bit.
Understanding the reality and the timeline of the new lease standard, what do I want to happen in 2019? Read on for my wishlist.