Lease Accounting: ASC Topic 842

FASB’s ASU No. 2016-02 – Leases (Topic 842) has been effective for public entities annual reporting periods beginning after December 15, 2018, including interim reporting periods within that reporting period. For all other entities, it is effective for annual reporting periods beginning after December 15, 2020, and interim reporting periods within annual reporting periods beginning after December 15, 2021. Companies should act now to prepare for this important transition. Topic 842 will likely impact the clear majority of entities on U.S. GAAP. Topics include:

• Scope and objectives of ASC Topic 842
• The core principle and how it varies from current U.S. GAAP
• Accounting from both the lessee and the lessor standpoints
• What is a lease? - The new standard has completely revised and changed the scope of lease accounting
• What constitutes “control” of an asset?
• Likely internal impacts on operations, tax, treasury, legal, technology, budgeting, contract management, and regulatory reporting
• Differences between a finance lease and an operating lease
• Recognition of a right-of-use asset and a lease liability
• The need for a thorough contract review
• Early renegotiation of loan covenants
• Addressing critical judgements
• The three types of leases for lessors
• Disclosure requirements
• Addressing lease modifications
• Developing new internal controls over financial reporting (ICFR)
• Coordination between the new revenue recognition standard and the new lease accounting standard
• Practical expedients and optional elections
• Transition guidance
• Development of a transition plan
• Communication plans with key external stakeholders