Soon, all publicly-listed companies will be required to make sure their assets and liabilities are recorded according to the new FASB/IASB and AASAB lease accounting standards. Companies will have to provide evidence to show how they have derived their accounting calculations and this must be verifiable when documenting compliance for their auditors.
Although there may be three standards to adopt (FASB for the US, AASB for Australia, and IASB for most of the rest of the world), there is a common theme: the need to properly record virtually all lease commitments and assets on the corporate balance sheet. This is in response to concerns by the FASB and IASB boards that over 85% of existing lease commitments around the world are not properly tracked – resulting in a gap in the accuracy of company valuations that is estimated to be more than US$ 3.3 trillion.
The new rules mean current off-balance sheet leasing activities will have to be shown on the balance sheet in future. This will make it easier for investors and other users of financial statements to understand the exact rights and obligations associated with leasing commitments. But because real estate is the largest or second-largest asset on the books of most businesses, this new requirement will have a significant impact on corporate balance sheets, as well as other factors such as people, processes and technology.
The biggest challenge now is to figure out how to make the compliance process as painless as possible.
At a time when many companies were still trying to recover from the ASC 606 Revenue Recognition implementations and associated efforts, a PwC survey of more than 600 executives in May 2018 discovered that 8% of public companies had not yet started their lease accounting implementation, and 34% were still assessing the impact. The numbers are much higher for private companies because they have an additional year to comply.
To help, we’ve compiled a white paper to help organizations understand the seven key challenges they may encounter on their journey to full compliance.
In this paper, we…
review the challenges …
provide recommendations …
highlight best practices …
and provide helpful guidance for developing your own roadmap to FASB/IASB compliance.
The seven potential pitfalls highlighted in this White Paper are based on lessons that have been learned by other companies on their journey to compliance. We hope it will enable you to create your own roadmap to success … and help you avoid the many bumps in the road along the way.
You can download ‘How to overcome Seven Key Challenges on the Road to ASC 842/IFRS 16 Compliance’ here.
If your organization is seeking a new lease accounting system, please visit our Trimble Manhattan to arrange a product demonstration.
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