On November 10, 2021, The Financial Accounting Standards Board (FASB) decided not to issue a third delay to the ASC 842 effective date for private companies. It was widely agreed that after two prior deferments, impacted organizations have had enough time to effectively prepare for their transition to the new standard.
The decision, however, came as a surprise to many private organizations that were, indeed, relying on the prospect of more time.
In late July 2021, we surveyed 500 senior accounting and finance professionals at private companies with more than 1,000 employees to understand where they were in their journeys toward complying with ASC 842.
Despite the deadline being mere months away, 75% of respondents stated they were not yet compliant with ASC 842, with 30% less than halfway through the process. Furthermore, 40% claimed they were only somewhat confident about their ability to successfully adopt the new standard in time for their next scheduled reporting period after December 15, 2021.
This data indicates that despite the many known risks associated with misreporting lease financials– including increased audit fees (51%), damage to an organization’s reputation (49%) and risk of legal action (48%) – private companies have largely underestimated the time and resources required to navigate this complex process, likely banking on yet another extension from FASB.
However, last week’s FASB session made it clear that despite private companies being largely underprepared and underconfident in their ability to adopt ASC 842, the sand has run out of that hourglass.
In addition to dealing with the pressures of meeting the confirmed deadline of December 2021, private companies are simultaneously evolving how they prioritize and manage their commercial real estate leases to accommodate new business needs. To effectively make changes and then measure their impact, they require easy access to their lease agreements.
What many of these same companies fail to realize is that they can leverage their lease accounting compliance project to gain a better overall visibility into their lease portfolio.
With the right technology and personnel in place, organizations can effectively achieve and sustain lease accounting compliance, and go one step further to maximize the value of their leases. However, there is one major caveat, and that’s time.
Private companies cannot spare another moment – leases are dynamic agreements, and the rules surrounding the already complicated standard are ever-changing. Impacted companies must act now to ensure they mitigate the risks and capitalize on the benefits associated with managing and tracking their lease portfolios.
To help you get on the right track, quickly, we’ve rounded up a few resources to best position you in your journey toward complying with ASC 842:
- Our first report under The Visual Lease Data Institute, which I referenced earlier in this blog post, explores the opportunities and barriers that companies face in their efforts to comply with ASC 842. It’s jam-packed with unique insights informed by a proprietary survey of 500 senior finance and accounting professionals at private organizations with more than 1,000 employees.
- Access to our bench of experienced industry experts, some of whom helped inform the construction of ASC 842. Leveraging our knowledge as seasoned accounting and finance professionals, we’re here to address any and all questions about the lease accounting guidelines, the technology and vendor landscape, audit preparedness and how to unlock real ROI for your company along the way.
- Our Lease Accounting Milestone Planner (LAMP)TM, an interactive and easy-to-use tool that will provide you with clear next steps and goals to help manage your lease accounting process, both before and after you meet initial compliance.
There’s no time to waste. With Visual Lease’s help, get started today.