The Road to Lease Accounting Implementation: Practical Tips and Strategies to Ensure You’re Compliant
Recording Available: Friday, February 05, 2021
Overview:
For most public companies, the adoption deadline for Financial Accounting Standards Board’s (FASB’s) Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842) has already passed. Their focus now shifts from adoption to quarterly reporting under the new lease accounting standard. Private companies, however, are still preparing for their implementation of the new ASC 842 leases and should learn from public companies’ experience.
Whether your company has moved past its deadline crunch or is still approaching its implementation date, it should have a more comprehensive approach that satisfies compliance needs. The ASC 842 can dramatically impact your company’s business with all the leases placed on your balance sheet. A lease accounting compliance strategy that also allows you to provide efficiencies for other systems is a must.
In this LIVE CLE Webcast, accounting expert Stephen G. Austin (Swenson Advisors, LLP) and real estate attorney Alison R. Weinberg-Fahey (Manatt, Phelps & Phillips, LLP) will provide an in-depth analysis of the implications of the new guidance in ASC 842. Speakers will also provide the best lease accounting implementation strategies and compliance practices to help you ensure that your company remains compliant in the future.
Some of the major topics that will be covered in this course are:
- The New Lease Accounting Standard: Sweeping Implications
- Takeaways from Public Company ASC 842 Leases Implementation
- Best Compliance Practices
- Implementing ASC 842 Technology Solution
- Improvement Opportunities
Agenda:
Swenson Advisors, LLP
AND
Manatt, Phelps & Phillips, LLP
Introduction to Lease Accounting
- Various rules: ASC 842, IFRS 16, GASB 87
- Balance sheet recognition of right-of-use assets and lease liabilities
- Immediate decrease in reported working capital
- Financial ratio changes may impact debt compliance and other financial covenants/requirements
- Required for public companies 1/1/2019 and for private companies 1/1/2022 (COVID-19 delay)
Leases overview
- Accounting definition of a lease
- Lease classification – 5 criteria - finance vs. operating
- Embedded leases
- Key accounting concepts
- Recognizing right-of-use asset and lease liability
- Lease component vs. non-lease component
- Fixed payments vs. variable payments
- Lease commencement vs. payment commencement
- Existing accounting under ASC 840 carries forward – assuming it is correct
- Can apply going forward – no impact to equity, no restatement of prior reporting
- Can exclude short-term leases
Key decisions and implementation issues
- Transition method, reassessment practical expedient package, short-term leases, hindsight
- Election to not separate non-lease components (and treat as one combined lease component)
- Determining lease term – “reasonably certain” exercise of renewal/extension/ termination options
- Determining discount rate – incremental borrowing rate, rate implicit in the lease
- Determining lease payments – fixed payments, rent increases, index-based increases, variable rent, rent holiday considerations
- Leasehold/tenant improvements – who pays and who benefits
- Previous deferred/prepaid rent
- Amendments and remeasurements
Lessons Learned from Public Company Implementations
- More complex than initially envisioned
- Takes longer than initially envisioned
- More stakeholders involved than initially envisioned
- Obtaining and analyzing data is the key
- Technology solution is not the driver
- Process changes needed to establish appropriate controls (identification, recording, reporting)
Current Developments and Opportunities
- Centralization of lease documentation
- Careful drafting of lease documents can address potential implementation/compliance issues (and reduce future accounting and auditing costs)
- Pandemic-related changes to lease arrangements/contracts – may include contract modifications
- Sale and leaseback transactions
- Can provide working capital for other strategic business purposes
- If “successful for accounting purposes,” can result in gain recognition if the following are met:
- Must meet the transfer of control requirements of ASC 606
- Leaseback must be classified as an operating lease
- No repurchase option unless for fair value at the time and there are other “substantially the same” assets available (excludes real estate)
- Treated as a financing if “not successful for accounting purposes”
- Following successful implementation, focus on establishing processes and controls that are reliable, repeatable, sustainable, and scalable
Closing thoughts
- Provide enough time (often 9 – 12 months) and remain flexible
- Enlist the support of professionals and assemble a team with the needed talent and experience
- Manage the project, monitor progress, and see through to completion
- Assess lessons learned for establishment of post-implementation compliance processes and controls
Who Should Attend:
- Chief Financial Officers
- Chief Accounting Officers
- Financial Controllers
- VPs and Directors of Finance
- VPs and Directors of Accounting
- Leasing Administrators
- Top-Level Executives
- IT Executives
Steve Austin, is a Certified Public Accountant in the states of California and Georgia, managing audit, SEC, Sarbanes-Oxley, and business …
Alison is an associate in Manatt Real Estate and a director in Manatt Real Estate Advisors located in the firm’s …
Course Level:
Intermediate
Advance Preparation:
Print and review course materials
Method of Presentation:
Live Webcast; Group-Internet Based
Prerequisite:
General knowledge of financial reporting/accounting
Course Code:
148768
NASBA Field of Study:
Accounting – Technical
NY Category of CLE Credit:
Areas of Professional Practice
Total Credit:
1.0 CLE
1.0 CPE (Not eligible for QAS (On-demand) CPE credits)
Login Instructions:
No Access
You are not logged in. Please Login or register to the event to gain access to the materials and login instructions.
Unlock All The Knowledge and Credit You Need
Leading Provider of Online Continuing Education
It's As Easy as 1, 2, 3
Get Your 1-Year All Access Pass For Only $199
SPEAKERS' FIRMS:
About Swenson Advisors, LLP
With offices in San Diego, CA, Murrieta, CA, and Hong Kong and as an active member of Integra International®, Swenson Advisors is a full-service regional accounting firm with the expertise and capabilities to serve both private and public clients, whether they operate locally, regionally or globally. Swenson has been at the forefront of adopting the new lease accounting standards in the U.S., and leads AccountLease™, a team of national experts which provides solutions to address the new lease accounting standards. The team includes accountants, real estate brokers, lease accounting software developers and attorneys.
Website: http://www.swensonadvisors.com/
About Manatt, Phelps & Phillips, LLP
Manatt, Phelps & Phillips, LLP, is a leading integrated professional services firm that represents a sophisticated client base, including Fortune 500, middle-market and emerging companies, across a range of industry sectors. Manatt’s groundbreaking approach—bringing together legal services, advocacy and business strategy—positions it to provide a unique and compelling value proposition. The firm’s offices are strategically located across California and New York, and in Chicago, Washington, D.C., and Boston.
Website: https://www.manatt.com/