With new FASB standards coming into effect throughout the market, CPAs everywhere are scrambling to figure out how to properly implement them in a hasty fashion without missing any of the key steps needed for success. The new leases standard that will be taking effect next year and the year after, however, can be confusing to understand, and many accountants don’t know where to begin when it comes to brushing up on the basics so they can meet the demands of their clients.
So, how should you go about properly implementing the new leases standard, and what key mistakes should you avoid? Read up on these tips, and you’ll be on your way to proving how invaluable you are to your clients in no time.
It’s all about time management
For CPAs, it’s critical to understand that time is of the essence; the new FASB leases standard must be obeyed in full in 2019 for public companies, and nonpublic companies will have to be compliant with them by 2020. If your firm hasn’t gotten started preparing itself now, it needs to get moving; ever second wasted is a huge loss, as you’ll quickly come to learn that the new standards take a gargantuan amount of time to understand and implement.
To that end, accountants should understand the critical importance of managing their time properly; love it or not, you may spend countless hours on a single lease soon, tirelessly working to ensure it’s up to date with the new standards. In order to do this without being bogged down and failing to review all of your leases before the new standards need to be met, you’ll want to brief yourself on some useful time management tips accountants can use to prevent themselves from drowning in a sea of paperwork.
Once you’ve got that out of the way, you can tackle the true challenge of this new standard: avoiding getting left behind. Accountants charged with preparing or reviewing financial statements should expect to locate virtually all their company’s leases and review them thoroughly to ensure they’re compliant with the new standards, a task that can be too mammoth for any one individual to take one, meaning it could demand a team. If your firm hasn’t re-examined its division of labor when it comes to lease standards, you’ll want to consider a temporary measure of creating a dedicated team tasked with meeting the new standards and ensuring no individual lease slips through the cracks unnoticed.
Lessees who are now required to include on the balance sheet the assets and liabilities for the rights and obligations created by a lease with terms of more than 12 months should go directly to the source of the change, and view the FASB’s resources on leases to ensure they’re up to date and now what to expect. It can’t be stressed enough that this process can’t be rushed, like gambling on slots million casino; firms that fail to dedicate enough time to ensure their leases follow the new standard will find themselves incapable of rushing through all their leases at the last minute.
Expect financial statements to change
The crux of the new standard will be most easily detected on financial statements CPAs are expected to fill out; the balance sheet will have many new faces that inexperienced CPAs may be unfamiliar with. All leases with terms greater than one year will now necessarily have to include right-of-use assets and any liabilities, for instance, meaning old but ongoing leases can’t be expected to meet the new standards if they fall short of these requirements.
Accountants should take some time to read up on the specifics of how the balance sheets they work with will change, as they’ll be much more capable of helping their clients and firms understand the new standard if they’ve done so. Gathering your entire lease portfolio and scouring over it closely to examine all your balance sheets won’t be enjoyable nor quick, but is necessary if you want to avoid being strictly penalized for failing to meet the new standard.
Every member of your team needs to be briefed on the new standards, too, not just the CPAs. Your legal department, for instance, may not have worked with implementing accounting standards before, and will thus need some extra help and guidance when it comes to understanding the new regulations if you don’t want your firm to suffer. Don’t forget the importance of keeping everyone up to date and readily armed to meet the new standards.
Above all else, take a deep breath and get moving; the new lease standard will be in effect before we know it, and CPAs need time more than anything else to sort through their lease portfolios and ensure they’re compliant. Manage your time and team properly, and keep a close eye on your balance sheets, and you’ll find yourself compliant faster than you thought possible.