Making the right choice to manage your transition to ASC 842

by | Jan 11, 2023

ARTICLE | January 11, 2023

The deadline for private companies to implement the new ASC 842 lease accounting standard is rapidly approaching. Overall, the transition to ASC 842 was a significant challenge for public companies, and that was with having more experience and resources than private companies commonly have. The good news is that private companies have options for getting support and streamlining lease accounting implementation.

ASC 842 was effective Jan. 1, 2022, for calendar year-ending companies and will continue into 2023 for fiscal year-end companies. Companies are starting to scramble to find effective solutions, but the time to act is now to avoid getting backed into a corner.

In the past, many companies have managed their leases with spreadsheets. However, given the increased visibility of leasing and the need for an effective audit trail—most organizations realize they need lease accounting software and, in many cases, additional assistance with the ongoing lease accounting effort.

There are several proven lease accounting software solutions to consider. With these platforms, companies typically have two options:

  • Self-service: A company can purchase the tool and attempt to maintain it in-house.
  • Full-service: The company can implement a lease accounting outsourcing strategy that leverages an experienced advisor to provide software tools and support ongoing accounting in a scalable, efficient manner.

Bridging the gap

Many private middle market companies find themselves stuck in the middle and unsure of the best way to proceed with ASC 842 compliance. Is their lease portfolio too large to maintain internally? Do they have the resources necessary to manage the initial transition to ASC 842? Luckily, some solutions are emerging to help companies implement a quick fix that gets them through the year and allows them to attain compliance and gain breathing room afterward to reevaluate their lease accounting stance.

For example, RSM’s 842 Express platform meets the unique needs of the middle market, helping clients perform the necessary calculations before the deadline. Companies can overcome the initial obstacles related to lease accounting and then take a step back to develop an effective plan for the future. Most importantly, we help companies dedicate the right amount of time to ASC 842.

RSM also offers an enhanced 842 Express Plus solution, which helps companies reach ASC 842 compliance in the short term and includes ongoing accounting support to help ensure that they stay in compliance moving forward.

With the calendar year end, companies have run out of internal options, and it will become even more difficult and costly to reach ASC 842 compliance. Organizations must act quickly to implement the best choice to account for leases now and into the future.

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This article was written by RSM US LLP and originally appeared on 2023-01-11.
2022 RSM US LLP. All rights reserved.

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FASB Proposes Changes to Lease Accounting Rules

The Financial Accounting Standards Board recently issued a proposed Accounting Standards Update for Leases (Topic 842). The update addresses related-party arrangements between entities under common control. This video provides an overview of the proposed changes.