Guide
ASC 842 lease accounting handbook
For companies who want to achieve and maintain compliance with the lease accounting standard.
- Introduction to the ASC 842 accounting standard
- Lessons learned from those who have adopted
- Key changes with the standard
- Planning a successful transition
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Introduction to the ASC 842 accounting standard
Lessons learned from public company and earlier private company implementation projects demonstrate that ASC 842 often requires more effort than originally anticipated. Developing a strong understanding of the compliance requirements for the latest standards is crucial for lessees to adopt on time and without material weakness.
Why the standards were introduced
The change to lease accounting rules were created with the purpose of closing loopholes in accounting guidance that could potentially allow private companies to mislead financial statement users as to the true nature of the company’s financial state.
Knowing your deadline
The following is a table showing when private companies need to transition to the new rules:
Given the significant work required for this transition, many private companies are considering starting the process well in advance of the deadlines.
| If your year end is: |
You must transition to the new standards by: |
|---|---|
|
December 31 |
January 1, 2022 |
|
March 31 |
April 1, 2022 |
|
June 30 |
July 1, 2022 |
|
September 30 |
October 1, 2022 |
Lessons learned from public companies
Most public companies significantly underestimated the complexity associated with implementing the lease accounting standards. They started late. They did not assign enough resources. And they did not allocate enough budget. A recent KPMG survey found that the cost of lease accounting projects increased at 62% of companies over the prior 12 months.
