ASC 842 Transition Stakeholders

1 min read
April 22, 2019
CoStar Real Estate Manager Blog

ASC 842 Transition Stakeholders

When tacking ASC 842 lease accounting initiatives, it’s important to realize the scope of departments affected and ensure everyone is represented on the project team at the outset. While real estate leases often represent the biggest portion of the financial materiality for lease accounting management and administration, all equipment and leases need to be taken into account for compliance with the new lease accounting standard. And, it’s important to note that it is not atypical for leases to be decentralized throughout the business. After all, IT departments often manage leases regarding printers, servers and other tech equipment while the real estate department focuses on building and land leases.

In short, for an ASC 842 lease accounting compliance initiative to be successful, a cross-functional teams that represents most – if not all- departments across the organization should be formed. 

Here’s a list of the ten groups to consider including in stakeholder meetings and ongoing communications:

  1. Accounting, for financial reporting and lease accounting expertise
  2. Financial Planning, for budgeting and forecasting of lease costs
  3. IT, for input on leases associated with servers, copiers, software and computers 
  4. Legal, which is involved with most lease agreement
  5. Logistics, which may include conveyor belts, trailers, trucks and rail cars
  6. Maintenance, which may include forklifts, pallet jacks and scissor lifts
  7. Procurement, which is involved with most leases
  8. Property Management and Lease Administration
  9. Real Estate, for retail, corporate buildings and land leases
  10. Treasury for advisement on incremental borrowing rate and debt covenant impact

All departments with leases need to be brought up to speed on the impact of the new lease accounting guidelines to get project buy-in. The level of project engagement with the team members will help ensure the right data is captured and new processes and procedures are embraced. Team leaders should anticipate some initial pushback, as centralization will take away some autotomy. It’s important to communicate these changes are being initiated due to compliance requirements -an outside force – but getting on board with a new lease accounting software system gives the business potential to achieve operational efficiencies, such as reducing errors and better leverage when negotiating contracts with vendors.