It’s Time to Own Your ASC 842 Implementation
If your company leases anything — such as buildings, equipment, or cars — you know there are rules for presenting and disclosing them on your annual financial statements. But in 2022, those rules are set to change significantly for private companies.
If you start preparing right now, there is still time for you to reach compliance and manage the liabilities the new rules create.
But believe us when we tell you: there’s no time to waste.
What’s changing: About the new standard
In the past, you could simply disclose certain leases on your US GAAP basis financial statements. But starting January 1, 2022, for calendar year-end entities, ASC 842 Accounting for Leases is changing the game for private companies, impacting nearly every industry.
Under the new rules, operating leases that were previously disclosed will be recognized on your balance sheet as both Right of Use Assets and Lease liabilities. The financial obligation you owe under a lease agreement is considered to be — and must be reported as — a liability.
And that amount could be shockingly high.
In fact, many companies that have already started their ASC 842 implementations have found a lot more leases on their books than they expected. That’s because many arrangements treated as service contracts such as transportation, storage, or IT service, when reviewed under the new definition of a lease, may have lease components that require recognition.
We’ve got a plan.
Steps that get you on track
Act now, and Barnes Dennig can help you meet the ASC 842 deadline with a substantially better outcome by:
- Reviewing your contracts to identify all your leases. With the changing definition of the word “lease,” this is the toughest part of the process for many private companies.
- Giving you an estimate of your liability and recommendations for how to reduce the impact. The sooner you begin the process, the more options that will be available to reduce your liability and manage the financial statement impact.
- Educating/training your staff to meet the requirements of ASC 842. We’ll walk them through the implementation process.
- Ensuring ongoing success with Lease Crunch software and the accurate accounting you need. Stay organized, year after year, with minimal effort.
Strategies that boost your value
If your 2022 liability total is higher than you thought, it could have a negative impact on your business. But Barnes Dennig professionals see beyond the numbers and go beyond what you might expect.
And a timely ASC 842 implementation can add value to your company that you can use to:
- Increase your borrowing power
- Pay higher dividends to your owners
- Pay higher salaries to attract and retain quality management and staff
- Attract investors or potential acquirers
The team that brings it all together
Barnes Dennig professionals are known for their thought leadership and consultative approach. That’s especially true of our ASC 842 team.
Tom Groskopf is the ASC 842 team lead as well as the head of our assurance practice. He has spent the last decade playing an active role at the national level advising on the new ASC 842 rules, and provides training to organizations and CPA firms across the country. So he knows more about lease accounting than almost anyone you’ll find.
Bryan Gayhart is Barnes Dennig’s expert on Lease Crunch software, a powerful tool for ASC 842 compliance. He brings a combination of in-depth knowledge and broad-based experience to advise both clients and colleagues on the practical implementation of ASC 842.
Matt Rosen brings in-depth knowledge and experience on ASC 842 and lease accounting issues with a practical approach and straightforward style that help clients successfully navigate issues related to ASC 842. He has spent the last year training other CPA firms to understand and help their clients with issues related to ASC 842.
What You Need to Know About the New Lease Accounting Standard
Watch as Tom Groskopf and Matt Rosen unpack key points of the new lease standard – and how you can prepare now for the best possible outcome.
Time is running short.
Contact us today to craft your ASC 842 compliance plan.