The Financial Accounting Standards Board (FASB) recently issued a proposed Accounting Standards Update (ASU) that would grant private companies, not-for-profit organizations, and certain small public companies additional time to implement FASB standards on current expected credit losses (CECL), leases, and hedging.
Although a collective sigh of relief will likely be heard from private companies if the FASB finalizes the delay, particularly for the new lease accounting standard (ASC 842), there are compelling reasons not to wait on your preparations. The FASB says the philosophy change in extending the effective date would offer these companies more time to learn from public company implementations.
“If we learned anything from both the revenue recognition delay and the public company implementation of lease accounting, it’s this: These projects take longer than you think. Better to implement early, then take a break at the end if you have the time.”
It will take longer than you think.
Most companies will need to collect significant amounts of data, deploy new software and update policies and processes to comply. The proposed delay is an opportunity for non-public companies to focus on more than “Day 1” compliance and increase opportunities to:
- Spread the implementation over a longer period of time.
- Allow you to use your internal resources more fully.
- Obtain a return on investment from increased transparency and management of your leases.
Start Now. Select Your Software and Minimize Future Costs.
For companies with more than a few leases, new software will likely be required to manage your leases and perform complex accounting entries. A thorough consideration of business requirements and diligence process around software selection can ensure the right answer for your company. Spending time on this early on can prevent some of the issues we’ve seen with re-implementations of software at public companies.
The difference between stumbling across the finish line and finishing strong is an action plan. Stick to your plan and be a lease accounting winner with efficient implementation and a sustainable solution for the future.
RGP has partnered with hundreds of companies in assessing their impact, developing winning plans, and implementing tailored lease accounting solutions – and we can help you too! Contact us to learn more.