Lease impact assessment and implementation services
Are you ready to implement the new leases standard? With new practical expedients, many organizations should re-evaluate their implementation plan. No plan in place? Now is the time to begin.
What is the change?
ASU No. 2016-02, Leases (Topic 842), changes the financial reporting obligations of companies that enter into leasing transactions for assets such as real estate, vehicles and equipment. It will significantly impact your organization if you have arrangements required to be accounted for under the new standard.
- Financial statements will be affected with lease related assets and liabilities coming on to the balance sheet
- Agreements beyond traditional leases may need to be accounted for under the new standard
- Financial arrangements such as debt covenants may be negatively affected
- Additional financial statement disclosures will be needed
- Internal training, policies and procedures and new internal controls regarding application of the standard will be needed for finance departments and financial statement users
- Companies with large numbers of leases to manage may need to implement software solutions, as well as processes and internal controls over those systems
How Baker Tilly can help you
Baker Tilly has developed a six-step methodology, tailored to your organization’s needs, to help you through the complex process of assessing impact, developing a plan and implementing that plan across your organization.
What leases will be impacted?
Determine your baseline and see if the change in accounting will have an impact on your organization.
How will the change impact your financial statements?
The depth of impact on your organization needs to be determined.
What will need to be addressed to comply?
Understand where processes, systems, controls and reporting need to be updated.
What is the right implementation plan for your company?
Develop a plan to address your gaps determined in the gap analysis and software evaluation.
What should you expect in implementing your solution?
Implement your chosen path with project and change management support throughout the process.
Have you addressed all controls? Are you audit ready?
Test and evaluate your controls, determine remediation, receive ongoing support and prepare for your implementation year audit.
What to do now
Gather and talk to your stakeholders:
It’s important to gather the people that need to be involved throughout the process and get their input on the effort they think your organization will need to expend.
Talk to your Baker Tilly advisors:
Talk with your advisors and begin to understand the process and how your organization can successfully implement accounting and systems changes for long-term success with leases accounting.
Understand lease accounting: Insights and webinars
Identifying a lease: Implementing the new leases accounting standard
The first step in applying ASC 842 is determining whether or not a contract, which is defined as an agreement between two parties which creates enforceable rights and obligations, contains a lease.
Lease classification: Implementing the new leases accounting standard
ASC 842 requires each separate lease to be classified at its commencement date, which is at the time that the lessee has the leased asset available for use.
Accounting for leases: Measurement and re-measurement
Discussion of the initial recognition and measurement of leases, and how re-measurement is made when changes occur in the contract during the estimated initial period of the lease.
Lessor issues: Implementing the new leases (ASC 842) accounting standard
There are some relevant changes lessors should take note of.
Accounting for leases: Effective dates and transition for ASC 842
The adoption of ASC 842 makes accounting much more complex for traditional operating leases. This inherent complexity makes the transition guidance equally complex.
Accounting for leases: Presentation and disclosures
The adoption of ASC 842, Leases, makes accounting much more complex for traditional operating leases. Not surprisingly, the disclosure requirements are quite extensive.