With the release of FASB’s new lease accounting standards, CPAs everywhere are rushing to formulate plans on how to properly implement the new standards without bending the rules or breaking the bank. Unfortunately, properly implementing the new standards can be a much more daunting task than many accountants initially expect.
CPA firms and individual accountants alike will need to prepare themselves if they hope to navigate the regulatory maze successfully. So what specific steps should a CPA take to properly implement their lease accounting standards? What are the common pitfalls, and how can they be avoided? Perhaps most importantly, can it be done efficiently and at a low cost?
Gather your data carefully
For firms large and small, gathering the necessary data to implement new lease standards can and probably will be a serious headache. It is nonetheless vital that a firm take the necessary time and pony up the necessary funds to gather the entirety of the information they’ll need; if your firm relies only on spreadsheets, for instance, it may be time to consider purchasing a more advanced software to help your employees out.
After you’ve assessed your firm’s capability to gather and assess it various leases with the help of software, you’ll want to take a step back and look at the big picture.
Any large firm, or even smaller ones which do business abroad, is likely to have a number of leases in many different languages. You’ll need to take the necessary steps to ensure you have a full grasp of what your lease portfolio contains, and ensure you have employees ready who can understand older, vaguer leases.
The consequences of not fully fleshing out your portfolio before you begin could be dear. If your company hasn’t been keeping a close eye on leases made at the local level abroad, for instance, some could slip through the cracks unnoticed, leaving you with an inaccurate lease portfolio as you try to get started.
With the effective date for these standards still quite a way off, some firms may think they can kick the can down the road, putting it off until later. Beginning the implementation process as early as possible, however, is the only real way to avoid disasters in the future. Ensure now, rather than later, that you’ll have the necessary number of employees and amount of time needed to guarantee you meet the deadlines.
After you’ve gathered the necessary files and information necessary, you can begin to develop an extensive plan on how you’ll comply with the new standards. The next step? Building the right team for the job.
Build your task force
Once you grasp the importance of starting early, your firm can get down to the task of assembling a competent task force to manage the implementation of the new standards. Perhaps the most important thing to remember during this period of the process is that inclusivity can save time and effort; don’t constrain yourself with a small team, but rather bring in senior management officials and your IT team to make sure you’ll have the resources and skills necessary to succeed.
Including your management officials in the process can help determine how the new rules might impact your firm’s existing leases, and means you can get a head start on future leases which will need to be crafted with the new standards in mind. The new model of standards could have a serious financial impact on your firm, meaning your senior officials presence will also help chart out what the total cost of compliance might be.
A savvy team of professionals with mixed backgrounds will be better suited towards navigating the maze of regulations than a small team merely consisting of accountants. Your firm should consider breaking up your task force into a number of different groups, each charged with a duty they’d be best suited for. One team focusing on tracking and reporting your progress, for instance, could be useful in keeping everything running smoothly and on time.
Your firm may need to invest in some employee training now, ahead of time, to guarantee it’s up to snuff when the deadline is nearing. Your team may also need to speak with stakeholders and update them on potential changes to the way your firm will operate in the future. If your team is struggling to find a solution to a problem, it can even submit an inquiry to the FASB itself.
The impact of the new FASB standards will vary based on the size and scope of your firm, but must be taken seriously by every accountant. The new standards will require many more financial statement disclosures, and you’ll need time to prepare. Don’t delay and handicap your future ambitions, but rather embrace taking action now and develop an action plan for success.