For Transition Lease Accounting
With the deadlines for the new lease accounting standards approaching quickly, many companies are asking how software applications can help automate the tasks required for the transition period. US GAAP filers adopting FASB’s new ASC 842 will be required to provide a modified retrospective approach which includes three years of comparative reporting for the income statement and two years of comparative reporting for the balance sheet.
Note: On March 7, 2018, the FASB voted to offer lessees an additional transition option that would eliminate the comparative reporting requirements if elected.
Top Three Challenges:
- Transitioning the Existing Lease Portfolio
- Modifications and Reassessments During Transition
- Errors With Current Lease Accounting
Three Key Software Requirements:
- Transition Policy Management
- Transition Accounting Engine
- Transition Accounting Subledger
Excerpt from the Transition Accounting eBook
There are three critical requirements for lease accounting software packages to enable the transition to the new standards. First, users should be able to centrally manage transition accounting policy elections such as the date of initial application, effective date, and choice of practical expedients. Second, the application should support multiple lease transition accounting subledgers for the current standard, new standard, and comparative reporting. Third, the software should include a transition accounting engine that can automatically generate transition subledgers, adjusting entries, and the information needed for financial disclosures.