Are you ready for the New Lease Accounting Standard?

The Financial Accounting Standards Board (FASB) approved the new lease accounting standard in February 2016 and reporting requirements will come into effect in 2018 and 2019 depending on your type of organization with retrospective application to previously issued annual and interim reports for 2017 and 2018 depending on Company type.

Who this affects:

  • Accounting departments
  • Procurement departments
  • Operations and Facility Management
  • Common lease arrangements include real estate (office/retail), equipment (manufacturing/construction), and transportation (aircraft/autos/trucks/trains)

What is it?

  • The new standard will change how operating leases are accounted for on corporate balance sheets
  • Lease obligations will appear on the balance sheet, but as a non-debt liability.
  • There is a limited effect on debt covenants.

How to Prepare:

  1. Inventory all equipment lease and rental contracts. Knowing the amounts and nature of contractual obligations and terms of leases will enable facility leaders to understand the company’s accounting and tracking needs.
  2. Identify IT/software requirements. To determine if the technology in place will meet the new standards, ask your accounting software vendor how they plan to support the changes.
  3. Review debt covenants. Although the lease accounting changes will have limited effect on debt covenants, discuss fully any implications with your bank or creditors.
  4. Seek out industry expertise. In addition to getting accounting expertise, facility management leaders and their colleagues will want to consult with equipment finance providers. Providers have the experience to help assess the possible impact of the changes on current and future leasing.
  5. Enact a plan. With the information gathered, facility leaders can start planning the budget and resources necessary for updates and systems changes to support the new rules.

DealSafe’s cloud based platform is ideal for meeting these requirements. We make aggregation of all your leases quick and painless, our industry templates and extraction service will digitize all the Terms you will need for review and calculation, and our analytics and sharing will allow you to quickly create your schedules with all pertinent details to share with your accountants.

Get in Touch!

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