MILWAUKEE, November 13, 2019 – LeaseCrunch, the only lease accounting software made by former CPA firm auditors for CPA firm auditors, today announced the successful completion of a System and Organization Controls (SOC) 2® Type II Audit examination.

“Our clients rightfully demand a software solution that has strong controls in place around security and calculation accuracy,” said Ane Ohm, LeaseCrunch Co-Founder and CEO.  “We are happy to go through the effort involved in this SOC 2 Type II examination to demonstrate our commitment to software excellence.”

MILWAUKEE, November 11, 2019 – LeaseCrunch, the only lease accounting software made by former CPA firm auditors for CPA firm auditors, says that improperly recorded ASC 840 leases by public companies is the biggest takeaway no one’s talking about from the new lease standard. 

“In working with public organizations who have implemented the new lease standard, no one is talking about this one important reality,” said Ane Ohm, CEO of LeaseCrunch. “Many organizations did not properly record leases under ASC 840, the predecessor to the new lease standard, and this complicates their implementation for the new lease standard, which is ASC 842.”

Another complicating factor is that the concept of materiality — whether a lease is big enough to be considered a material liability — comes into play when dealing with operating leases.

Written by Ane Ohm, Co-Founder and CEO, LeaseCrunch^®

Written by Ane Ohm, Co-Founder and CEO, LeaseCrunch^®

How is LeaseCrunch impacted by delaying the new lease standard implementation for non-public companies?

Interest in our lease accounting software hasn’t slowed. CPA firms are successfully using the software to work through implementations for both public and privately held organizations, with many more firms telling us they’re working to keep momentum going with clients despite the delay.

Written by Ane Ohm, Co-Founder and CEO, LeaseCrunch^®

Will spreadsheets do the trick for implementing the new lease standard? The general consensus seems to be “no,” but I still hear about organizations exploring the spreadsheet route—especially those with smaller lease portfolios who feel there isn’t a viable software option.

In less than a decade WeWork has created a brand with global recognition that investors valued at $47 billion in its latest fundraising. That valuation is 10 times the market cap of its larger rival, Zug, Switzerland-based IWG Plc.

“There’s a lot of desire to handle this IPO in an intelligent way and present a viable business model to the Street and to the analysts because nobody wants WeWork to fail,” said Michael Cohen, president of greater New York City at brokerage Colliers International Group Inc.

Property owners have embraced flexible workspaces that allow a variety of tenants to house temporary operations at the same site without signing long-term leases. But short-term contracts pose an investment risk if tenants vacate and revenue dries up during a downturn.

The issue of materiality in the new lease accounting standard can be challenging, but LeaseCrunch, the only lease accounting software made by former CPA firm auditors for CPA firm auditors, says there are three key steps to understanding the issue.

“Now that operating leases must be captured on financial statements under the new lease standard, many CPAs are wondering about materiality,” said Ane Ohm, CEO of LeaseCrunch.  “For the international standard, IFRS 16, the materiality threshold is set at $5,000, meaning that leases under that amount do not need to be accounted for on the books.

“However, FASB did not set a similar threshold for materiality under the U.S. standard, ASC 842, so many organizations are wondering how to determine what operating leases are material enough that they should be added onto their balance sheets. 

“As with many aspects of the new lease standard, materiality is an area that requires judgment—though there are important considerations that can help.”

As with any accounting standard shift, the new lease standard (ASC 842) brings momentous changes to accounting processes and financial reporting. While the main differences are well-known, I’ve taken a particular interest in the smaller nuances that live within the new standard. (Yes, I’m an accounting nerd and I love learning about and discussing all things related to leases!)

In this article, I’m sharing five of those intricacies that you may not know about the new lease standard, but that are critical to making the transition.