Robert M. Tarola, CPA, CGMA and President of Right Advisory LLC, provides insights on the new lease accounting standard. All US and most non-US companies must adopt a new lease accounting framework over the next one-to-two years. That framework requires the recording of assets and liabilities for all leases greater than one year in duration. Previously “off-balance sheet” leases will need to be analyzed, documented and remeasured for accounting purposes.
The challenge to do so can be daunting. Companies will have to identify, catalogue, assess and calculate a new lease liability for financial reporting. In essence, moving footnote information onto the balance sheet. And these calculations can be complex.
It is important for companies to begin the process now. And where leasing is significant, consider the tools and time needed to get it done right. In most companies this will likely require specialized lease administration software as well as a dedicated team to complete the project.