Reproduced with Permission © 2019 The Bureau of National Affairs, Inc.
Many private companies are breathing a collective sigh of relief since the FASB postponed the effective date for the new lease accounting standard (ASC 842) — now Q1 2021 for calendar year-end private companies. The one-year deferral has some moving implementation plans to the back burner. But ask the public companies that have already implemented ASC 842 and they’ll tell you — waiting to start could be a big mistake.
PwC’s 2019 lease accounting survey asked public companies to consider, in hindsight, what they would do differently during their transition to the new leasing standard, if they had the chance to do it over. These “lessons learned” emerged from more than 200 finance executives who offered words of wisdom: start early, focus heavily on selecting your lease accounting system, and ensure you have the right expertise (in-house or outside).
Here’s a closer look at the major themes that emerged:
The finance executives we surveyed gave compelling reasons for starting implementation early, including reducing time pressure and the need for band-aid solutions down the line, lowering costs, and allowing more time for testing and fixes.
Disappointment around initial lease accounting software solution selections was widespread. Executives noted that starting the vendor selection process earlier would have afforded them the opportunity to better tailor the lease accounting systems to their business needs and budget.
“Start earlier and test more scenarios.”
Project staffing also proved challenging. Many executives regretted not having dedicated resources — internal or external — focused on lease accounting implementation. Lean staffing, competing priorities (like revenue recognition), and underestimating project needs slowed progress and led to long hours to reach compliance. Leveraging internal project management expertise, making a strong business case for implementation and post-implementation support, and “identifying the right people with the appropriate skillset/mindset” early on would have facilitated the effort, according to survey respondents.
Technical expertise was another recurring theme. Executives emphasized the importance of strong technical support to implement lease accounting software, including close coordination between internal IT resources and the lease system provider. Early and close coordination between the tech and accounting teams would also have provided a fuller picture of the accounting system’s functionality.
Lease accounting implementation isn’t going to happen overnight, but fortunately for private companies, there are many valuable lessons to be learned from public companies that navigated the new standard. Starting early, choosing the right vendor, and making sure you have the right team with the appropriate expertise can help you save time and money in the long run.
Partner, Private Company Services, PwC US