The new FASB ASC 842 lease accounting standard is official, and the time for companies to create a compliance plan is here.
For most organizations, establishing right-to-use assets and lease liabilities for real estate and equipment leases will be a sizable task. CoStar’s lease accounting software can help ease ASC 842 compliance projects with the most proven solution for the complex calculations, financial reporting and system integrations.
ASC 842 represents a significant overhaul of the accounting treatment for leases, with the most significant change being that most leases, including most operating leases, are now capitalized on the balance sheet. Under ASC 840, FASB permitted operating leases to be reported only in the footnotes of corporate financial statements. Under ASC 842, the only leases that are exempt from the capitalization requirement are short-term leases less than or equal to 12 months in length.
CoStar also recommends these 12 Steps for FASB Lease Accounting Compliance:
- Obtain a full understanding of FASB ASC 842
- Set a compliance timeline
- Meet with a cross-functional group of leasing stakeholders
- Organize a project team
- Select a software solution for lease management and reporting
- Compile a list of all leases
- Evaluate compliance with existing accounting standards
- Evaluate the HR impact and adjust staffing/training plans
- Set internal accounting policies around leasing
- Evaluate the process flow for leases and adjust to ensure efficiency
- Review new processes, software, policies and pro-forma results with auditors
- Set up a sustainable process for managing leasing data
See why experts recommend CoStar to manage and report on real estate, equipment and other leased assets for compliance with the new FASB ASC 842 standard on our lease accounting software overview page.