The management letter from auditors, typically received by CFOs after the annual audit, highlights key financial findings and suggests improvements for internal controls. It also informs about new accounting standards that need adoption.
Steps for Lease Accounting Compliance
To ensure compliance with lease accounting standards, companies should follow these steps:
In lease accounting specifically, the completeness assertion claims that all leases have been captured and properly capitalized on the balance sheet.
Familiarize with Deadlines
Understand and allocate sufficient time for gathering lease documents and processing necessary data.
Create a Plan and Identify Stakeholders
Recognize major milestones and assign key players or teams to each initiative, understanding their roles and the importance of deadlines.
Centralize Relevant Documents
Use a centralized system for easy access, analysis, and updates of lease information. Invest in efficient technology for this purpose.
Develop Business Requirements
Before selecting technology or partners, consult with internal stakeholders for their input. This will aid in smooth adoption and ongoing compliance.
Compliance with the latest lease accounting standards, (ASC 842, GASB 87, and IFRS 16), is not just a regulatory requirement but a strategic opportunity. The management letter serves as a vital roadmap in this process, pointing out critical areas that need attention. By understanding the importance of deadlines, creating a well-thought-out plan, centralizing documentation, and involving key stakeholders in the decision-making process, companies can turn what seems like a daunting task into a manageable and beneficial undertaking.
Takeaway: Remember, compliance is not just about meeting standards; it’s about enhancing the overall financial health and transparency of your organization. By adopting a proactive approach and leveraging technology effectively, businesses can not only meet the necessary compliance requirements but also gain insights that drive better lease management and financial decisions. In the evolving landscape of financial reporting and management, staying ahead in compliance is not just good practice—it’s a competitive advantage.