ASC 842 Implementation Services

The Financial Accounting Standards Board has issued Accounting Standards Update No.2016-02, Leases (Topic 842), an Amendment to the FASB Accounting Standards Codification. This amendment outlines changes in the way that lessors are required to report certain monies collected for leased assets. These new lease accounting standards – known as ASC 842 – went into effect for public companies as of January 2019 and will begin for private companies and not-for-profits starting January 2020.

A few aspects of lease accounting that this amendment affects include the following changes (among others):

• ASC 842 (the New Lease Accounting Standards) has set forth different requirements for sales tax & other similar taxes depending on the method of tax collection. For example, if the lessor is responsible for taxes collected along with lease payments from the lessee, then it will be counted as revenue. However, in the case that the lessor collects taxes on behalf of a third party, they would not be considered revenue.
• ASC 842 requires that certain lessor costs, that are either paid by the lessee directly to third parties or to the lessor as reimbursement, be tracked and treated accordingly in lease accounting.
• The amendment now requires the recognition of variable payments for contracts with lease and non-lease components, specifically during the accounting period in which the changes occur.
• The recognition of certain lease obligations as true liabilities shall be required.

What this means for your business

Businesses face heavy penalties for dragging their feet on compliance or getting it wrong, so why take the chance? Horizon Projects Consulting Corp. is the expert in managing programs and projects that can ensure a smooth transition to the new system and limit your financial exposure. Beyond our vast project management expertise, we have successfully lead programs for the adoption and deployment of ASC 842 which included managing the people, process and technology implications for Fortune 500 companies.

In order to ensure compliance, companies that frequently use leases and accept lease payments will need to abstract financial information from multiple, maybe hundreds of documents. This is a lengthy and detailed lease accounting process. The correct information must be identified, organized, abstracted, validated and uploaded to a system to ensure consistency and avoid compliance errors and backtracking.

The Horizon Projects Consulting Corp. Lease Accounting Implementation service enables companies to correctly abstract needed information from their leases in a thorough and consistent manner, eliminating the need for costly rework.

Implementation Services

1. Solicit requirements, evaluate and or recommend lease accounting appropriate software solution.
2. Create and implement lease abstraction standards.
3. Create and implement lease abstraction standards validation process.
4. Implement integration between the Lease Accounting system and with the financial system of record (General Ledger & or Accounts Payable).
5. Create and implement lease processes.
6. Create and implement controls around lease.
7. Create, and proactively manage a plan to handle the people, process and technology implications of the adoption.