Why Companies Should Seek ASC 842 Guidance
If you’re a business owner, chances are you’ve heard of ASC 842 guidance. This accounting standard requires companies to account for leases differently than they have in the past, and it has caused quite a stir.
In this blog post, we’ll look at the several steps businesses need to take to comply with ASC 842 guidance. Read on to learn more about the procedure.
Finding Leases Your Company Already Has
The first step for companies looking at ASC 842 guidance is finding all the leases your company currently has. This can be tricky since some leases might be embedded in service or equipment purchase agreements. It’s essential to read through all agreements carefully and identify and account for all leases.
Leases Embedded in Agreements
Once all the leases have been found, it’s essential to understand how they are embedded in other agreements. For instance, some agreements may include services bundled with the lease agreement, so it’s necessary to separate those services and understand their impact on the lease agreement. This will help ensure that your company properly accounts for each lease according to ASC 842 guidance.
Finding a Software System
After understanding how the leases are embedded in other agreements, it's time to find or build a software system that can track all these items accurately and efficiently. Several software systems available today can help companies track their leases while complying with ASC 842 guidance.
Data Extraction & Migration
Once you have chosen a software system, it’s time to extract data from existing systems and migrate them into the new system you chose. This process requires careful attention to detail so that no data is lost in transition and nothing gets corrupted during migration. It’s also essential to ensure any privacy laws related to data migration are followed correctly so as not to leak sensitive information during this process accidentally.
Setting up Internal Control Processes
The final step of achieving compliance with ASC 842 guidance is setting up internal control processes within your organization to prevent errors from occurring when dealing with lease-related activities going forward. These processes should include checks and balances and any additional paperwork needed for each lease transaction to ensure accuracy and compliance with applicable laws and regulations.
Managing ASC 842 Guidance: In Conclusion
With these several steps taken care of, businesses should be ready for whatever comes next when complying with ASC 842 guidance. Understanding how leases are embedded in other agreements, finding or building software systems specifically tailored towards managing leased assets under ASC 842 guidance, and extracting data from existing systems and migrating them into new ones are essential.
By understanding how to set up internal control processes, businesses should now have everything they need to prepare themselves for compliance under ASC 842 guidance now and into the future. If unsure about anything related to ASC 842 guidance or accounting standards, consulting an experienced accountant would be the best practice. We hope you found this information helpful, and thank you for reading.
