Lease accounting changes
Comply with the recent lease accounting changes before the deadline.
Lease accounting changes are here. Are you ready?
New lease accounting standards will have an estimated $3 trillion impact on companies’ balance sheets. Know how your ongoing processes will be impacted.” 1
What to expect from lease accounting changes
More transparency
Stakeholders will gain a clearer view into an organization’s leasing activities and their effects on the financial statements.
Bigger balances
Lessees will be required to recognize most leases “on balance sheet.”
Dual effect
Lease accounting changes will not only affect policies but also the systems used to manage them.
Limited resources
Companies may experience resource constraints as they manage implementation while still supporting their regular accounting processes.
Ongoing compliance
Processes and controls that govern lease acquisition and modification will need to be addressed.
Tax implications
Lease accounting changes could affect the organization’s income tax reporting.
More transparency
Stakeholders will gain a clearer view into an organization’s leasing activities and their effects on the financial statements.
Bigger balances
Lessees will be required to recognize most leases “on balance sheet.”
Dual effect
Lease accounting changes will not only affect policies but also the systems used to manage them.
Limited resources
Companies may experience resource constraints as they manage implementation while still supporting their regular accounting processes.
Ongoing compliance
Processes and controls that govern lease acquisition and modification will need to be addressed.
Tax implications
Lease accounting changes could affect the organization’s income tax reporting.
Our lease accounting software solution can help make compliance simple
Crowe Lease Accounting Optimizer
Now fully embedded within:
- Microsoft Dynamics AX
- Oracle NetSuite
Also available as a standalone lease accounting software solution to integrate with most other financial systems.
Crowe helps Marshalls PLC comply with new lease accounting standards
Hear how the Crowe Lease Accounting Optimizer can help your company comply with new accounting standards for leases.
4 ways you can prepare for the lease accounting changes
If your organization engages in leasing, you need to prepare for implementation now. Early adoption is permitted, but being late is not an option.
- Assess the scope. Companies need to identify their current and in-process lease agreements as well as relevant policies, procedures, data, and systems involved. Various departments – including accounting, finance, operations, logistics, legal, tax, and IT – should be represented.
- Select an approach. Significant planning should go into the selection of a transition approach and required system enhancements. This includes selection of practical expedients and organization of the lease accounting function.
- Plan for transition. Develop a project plan and secure necessary resources to meet the effective date.
- Implement and monitor. Execute the plan, monitor status, and communicate with relevant stakeholders with a goal of full compliance on or before regulatory effective dates.
You should also consider other ramifications of the lease accounting changes beyond your organization’s financial statements, such as the impact on key financial ratios included in debt covenants or key performance indicators used to manage the business.
1 Chris Bryant and Andrea Felsted, “Say Hello to $3 Trillion in Forgotten Debt,” Bloomberg, March 20, 2017, https://www.bloomberg.com/opinion/articles/2017-03-20/say-hello-to-3-trillion-in-forgotten-debt
Whether you have just begun your compliance journey or are well on your way down the path to compliance, our experienced lease accounting, consulting, and technology professionals are here to assist. We can help you through the process to optimize your compliance efforts.
