Easily achieve compliance – ASC 842

ASC 842 Leases

Automate your lease accounting processes

While public companies already adopted the new lease accounting standard, non-public companies now have to gear up for significant adjustments that come along with the implementation of ASC 842. LucaNet accompanies you as a reliable partner and supports you to achieve compliance with the new guidance for lease accounting.

Who is particularly affected by ASC 842?

Companies with a large portfolio of leases, for instance in the retail and aviation industry, are particularly affected by the new standard. However, all companies with rental and lease contracts regardless of the industry must apply the new guidance for lease accounting and may be significantly affected. The FASB revised the definition of a lease and companies need to reassess which contracts meet the definition of a lease and need to be accounted for according to ASC 842.

What is the effective date for ASC 842?

Public business entities were already required to apply the new topic for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. For private companies and private not-for-profit entities, the effective date for the standard has been deferred: they now must apply ASC 842 for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022.

What is the objective of ASC 842?

The objective is a more accurate presentation of the lessee’s rights and obligations from leases on the balance sheet. Transparency and comparability of lessee’s financial statements should be improved as well due to the similar accounting requirements for operating and finance leases under ASC 842. Lessees now have to recognize right-of-use assets and lease liabilities for both types of leases.

What are the effects of ASC 842?

Lessees must now recognize all leases on the balance sheet. Whereas lessor accounting remains largely the same, lessees are required to recognize future lease payments as a liability and a corresponding right-of-use asset on the balance sheet. Thus, key financial ratios are expected to change significantly with the implementation of ASC 842.
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What are the biggest challenges of ASC 842?

The new standard comes along with various operational challenges and implementation may require much more work than anticipated. The challenges are not limited to the accounting function. Companies likely need to adjust their overall processes regarding the collection and administration of their leases. Relevant contract data must be identified and extracted to properly account for leases under the new guidance. Leases must also be continuously monitored to identify and account for reassessments. All these obstacles must be overcome to achieve compliance with ASC 842.

You should therefore rely on a professional tool to support you with the new requirements. You will realize: Lease accounting according to ASC 842 can be so simple.

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What are the benefits of an ASC 842 tool?

The use of a professional solution has many advantages:

You implement standard procedures for data entry and management of your contracts.

You automate the complex calculations required by the standard.

You obtain a clear overview of the impact of ASC 842 on your financial statements.

You can trace the effects on the balance sheet and income statement to individual leases and generate simulations for budgeting and forecasts.

You save time when monitoring leases and accounting for remeasurements and modifications.

You facilitate the preparation of quantitative disclosures by creating automated reports and analyses.

How the ASC 842 tool from LucaNet supports you

Rely on the LucaNet App Accounting for Leases to facilitate the implementation of ASC 842.

This tool offers you:

  • Simple transition from ASC 840 to ASC 842
  • Use of a comprehensive system, no further additional tools required
  • Automated recognition and measurement of leases, including modifications, foreign currency translation, and quantitative disclosures
  • Simple and intuitive user guidance
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Do you have more questions on ASC 842?

If you have more questions concerning our ASC 842 software, we would be pleased to advise you.

Feel free to contact our ASC 842 experts.

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