ASC 842 requires companies to calculate right of use (ROU) assets and liabilities for each lease (subject to practical expedient selections); these balances must be refreshed each period as payments are made. Depending upon the number of leases, an appropriately controlled excel file could be all that’s needed, however, as a rule of thumb, it’s prudent for a company with over 50 leases to think about a technology solution. Increased disclosures required under the new standard may also be facilitated by the right system. See our prior post titled “Assessing Capabilities of Existing Technology and Lease Data Gaps” for further considerations when identifying technology solutions.
How many leases a company holds, and what systems are already in place, will determine the time and effort required for implementation. Although the adoption timeline has been extended, private companies should remain diligent in assessing the changes and implementation efforts required for adoption.
With the additional “gift” of time from the FASB, we encourage companies to become familiar with the new requirements, identify the impact, and propose adoption strategies to drive better business decisions. At MorganFranklin, we have dedicated and experienced professionals who understand the challenges private companies may face in adopting the new standard. We can help you to take a thoughtful approach to compliance, which includes a consideration of practical expedients, necessary controls and procedures for sustainable reporting, and the right information to meet disclosure requirements ahead of the adoption deadline.