Are You Ready for The New Lease Accounting Standard?
In February 2016, the Financial Accounting Standards Board (FASB) released its much-anticipated lease standard, ASC 842. Then in June 2017, the Governmental Accounting Standards Board (GASB) released its own lease standard, GASB 87, effective June 30, 2022. Finally, the Federal Accounting Standards Advisory Board (FASAB) issued the new FASAB Lease Accounting Standard for federal organizations, Statement of Federal Financial Accounting Standards 54 (SFFAS 54) which now has an effective date of October 1, 2023. Regardless of which standards you follow or how far you are in the compliance journey, these lease standards may significantly impact your entity if you have contracts that are leases or contain leases that support your operations.
How We Can Help You
Whether you have 5 leases or 5,000, accounting for leases involves complex calculations and a number of new reporting requirements. Cherry Bekaert understands the impact of the lease accounting standards on your entity could be significant. We know this is not a one-time implementation issue; therefore, we have developed the following service offerings to assist with compliance and a long-term business solution.
We can also assist with implementation and IT system solutions, if necessary, through Cherry Bekaert’s IT system strategic alliances, such as LeaseQuery and LeaseCrunch.
Lease Accounting Service Offerings
- General diagnostic discussion with management
- Access to a cloud-based, third-party software to input lease data
- Consultation and interpretive guidance, including FASB, GASB, FASAB, and AICPA interpretations
- Checklists and other tools for implementation
- Assistance with tool identification and vendor evaluation
- Assistance to management with identification of unknown or embedded leases
- Assistance in identifying additional disclosures
- Assistance in identifying additional reports and data needed
- Review of your management’s lease policies and practices
- Compare and contrast the ability of your current processes and controls and IT systems to meet the requirements of the new standards
- Analysis of potential impact on debt covenants
- Analysis of potential impact on compensation agreements
- Reviews of public company filings for comparable companies in similar industries
Next Steps
Cherry Bekaert’s dedicated team of professionals can help you navigate the lease accounting standard changes and assist with your approach to implementing the new standard.
- Performing an inventory of all leases – Begin gathering all lease-related documents to identify the key assumptions necessary to implement the new standard.
- Evaluating the impact – Recast your historical financial statements using the new lease model so you can consider the impact on compliance with agreements tied to your entity’s financial statements.
- Proactively work with your bank – Talk with your bank to discuss the impact on loan covenants and consider whether new or amendments to existing debt agreements are required.
Now is the time to plan and adequately prepare for changes that will impact your business.