New Lease Accounting Standards: 10 Lessons Learned

Over the past 2 years, Crowe has helped both private and public companies work through a myriad of issues when implementing the new lease accounting standards under FASB ASC 842 and IFRS 16. Whether your company has already created a plan to address these changes or you are just beginning to grasp what the changes will mean for you, let’s take a closer look at the lessons learned thus far:

1. Start early. Our experiences showed us that the earlier a company started implementation, the easier and less costly it was.

2. Lease contracts are everywhere. Everyone underestimates the effort required to collect lease information and organize it centrally in a uniform format.

3. Complexity abounds. Creating a common data template for collecting lease data and standardizing data requirements is a must.

4. Accounting will be stretched. Budgets should include additional accounting staff to gather lease data and interact with other departments and branch offices.

5. Involve other departments. Bring in legal, purchasing, information technology (IT), real estate, and others involved with leases to be part of the transition process.

6. Communicate early and often. Conversion to new lease accounting processes requires change for all departments and divisions involved. Communications should provide regular updates on new processes and requirements.

7. Take a project management approach. Many stakeholders need to be involved in data collection and trained in new policies, procedures, software applications, and reporting requirements. The accounting department can serve as the project sponsor and central point of contact as it leads the transition.

8. Be prepared for surprises. Nearly every company found some unexpected twists as they delved into implementation. One company had leases that were verbal agreements – but they must be cataloged for the new standard.

9. Keep your auditors informed. The transition approach your organization adopts may have significant impact on your company’s balance sheet. Share information on how your company will handle lease accounting going forward and the technology solution you adopt.

10. Invest in the right software. Involve IT early to help evaluate software solutions and advise on selecting one that streamlines data collection and can be easily embedded in existing company systems.

Crowe Lease Accounting Optimizer solution can ease your company’s transition to the new standards. Use it to:
• Compile lease data from multiple sources
• Perform multi-book accounting under parallel standards
• Automatically make mid-life adjustments after lease modifications
• Create a full suite of reports to satisfy disclosure requirements

Crowe Lease Accounting Optimizer is fully embedded within Microsoft Dynamics™ 365, (Microsoft Dynamics AX). Take a test drive on Microsoft AppSource.

Get a demonstration and see firsthand how Crowe can help your organization.

By Dan Edwards, CPA, Crowe LLP