The accounting industry has been buzzing with news and updates regarding ASC 842 lease accounting compliance for a while, as the new standards have already taken effect for public companies as of January 2019. While the full compliance cycle is complete for those companies, private companies are now busy ramping up for the year-end deadline. Privately held companies have the good fortune of benefiting from the lessons learned for lease accounting from the experience and insight gained from public companies.
Here’s a quick breakdown of the lease accounting compliance deadlines and the entities affected:
- Public business entities were required to apply the leasing standard for annual reporting periods (including interim periods therein) as of December 15, 2018.
- Certain not-for-profit entities, and employee benefit plans that file financial statements with the SEC, are also subject to the same transition date as public business entities.
- All other entities are required to apply the leasing standard for annual periods as of December 15, 2019.
- Earlier application is permitted for all entities
For successful compliance, FASB recommends starting the compliance process as early as possible. The clock is ticking for companies racing to meet the December 2021 deadline, as selecting a software solution and migrating lease data into the system is a significant undertaking. Companies can he heartened to know there are hidden benefits associated with lease accounting compliance software, such as better data management, increased leverage when negotiating with vendors and more efficient audits. A survey revealed 95 percent of public company respondents reported adopting the recent accounting changes was somewhat or very difficult. But given the later deadline, private companies have the advantage of learning from their predecessors. Click here to learn more about four keys to success and lessons learned during the initial ASC 842 compliance cycle with public companies. And get inspired by how CoStar contributed to these Fortune 100 success stories.