FASB Proposes Last-Minute Changes to Lease Accounting Rules
As the Financial Accounting Standards Board (FASB) makes changes to lease accounting rules for private companies and nonprofits yet again, we’re here to clear up a few things. Phillip Hann, senior manager at 415 Group, breaks down the highlights and provides guidelines for implementation.
Public companies have adjusted to the new lease accounting rules over the past few years. Now, it’s time for private companies and nonprofits to catch up.
The new rules reformat financial statements in a major way. Organizations will now have to include certain operating leases – and their future liabilities – on their balance sheet. Some people see this change as a negative in creating more work for companies with not a lot of advantages.
On the other hand, some companies might find the changes beneficial. When you list any future outflow of cash as a liability, you’ll get a clearer snapshot of potential cash deployment. This can help your company better plan and prepare for any curveballs.
At 415 Group, we understand the lift it takes for organizations to make this change. That’s why we created a new internal team to focus on these lease accounting rules and related implementation. This cross-functional team of tax, audit, and administration experts have been learning and training for nearly ten months. We’ve already begun helping clients implement the changes needed using a specialized software.
If you’re panicking about incorporating all of your lease information into your financial statements, first take a deep breath. Then, review our recommendations:
- Start by better understanding the new guidance. Be sure to read through the rest of this article, gather additional research, and reach out with any questions.
- Then, gather all relevant lease agreements and review them internally, with an attorney, and/or with 415 Group. Make sure you consider potential leases you might not have known existed.
- Work with your accounting firm to help with the transition from the old to new guidance. An implementation timeline can help things go more smoothly.
- Next, educate your organizations’ owners, investors, bankers, etc. on the new look of the financial statements.
- Finally, you’ll need to adopt policies for new leases to make sure the new leases are not overlooked.
FASB’s lease guidance details are very nuanced. You’ll need some help getting through all of it, so it’s smart to work with a trusted partner like 415 Group. Our team stays up to date on the ever-changing rules and regulations and soaks up all of the little details. We’ll help you through the process and properly implement everything. If you’re ready to get started, reach out to us today.