ASC 842 / IFAS-16
Leases and Assets
2022 Update: Recently codified and then delayed by COVID the postponed start dates are now upon businesses. Under the new standards(US-GAAP and IFAB),the obligations for leases to carry their Lease Agreement(BOTH Real Estate and Embedded Assets)on their balance sheet as both assets and liabilities. While this is a financial reporting issue, compliance with the new standard requires obtaining information from multiple functions within a particular organization. Legal, accounting, facilities management, insurance, local and regional managers, operations managers and possibly others within your organization may very well need help in compiling what is (or more importantly–what is not)in the lease. In many cases, abstracting data from a single lease can take weeks and hours of follow up with various parties. A single missed document can cost a company tens of thousands of dollars. A single 10% late fee could be 2 or three times what we charge over an ENTIRE TERM
Embedded Assets
Don’t forget about the Embedded Leases…. They have to be included too. In a company, of just about any size, it’s not just the lease itself that directs their daily lives. Forklifts, vehicles, copy machines, and even the furniture your employees sit at can be leased. ASC 842, as codified, requires you to carry these “assets” on your balance sheet. Someone needs to help a company look deep into their existing manufacturing, distribution, human resources, marketing, IT, administration, and other functions to see which departments have qualifying leased assets. In many cases anoutside3rdparty (a project manager or point person) is needed to complete the enormous process of locating all components of the lease, analyzing the restrictions and provisions, and creating a working abstract for administrating