NEWS: Impact of & Solutions for FASB Changes to Financial Reporting
What do the FASB changes mean for your business?
Industries affected: Manufacturing, Utilities, Healthcare, Financial
As the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) move forward with plans to alter the way that leases are accounted for on financial statements, organizations will need to change their lease accounting processes for everything from property and buildings to machinery and equipment. While this won’t have an impact on how you do business, it will certainly have an internal impact on financial reporting, including financial ratios and reported liabilities. As the changes are finalized with an expected compliance date beginning in 2015 or early 2016, businesses need to leverage this window of opportunity now in order be to adequately prepared for these mandates.
The new regulations will make it necessary for businesses to report any long-term lease liabilities (longer than 12 months) on the balance sheet. Previously, these types of leases could be reported as a footnote to the financial statements. When the new regulations go into effect, these leases will need to be reported entirely in the liability section. This FASB change will impact businesses in every industry, especially highly regulated industries such as manufacturing, utilities, health care and financial services.
Whether you manage your lease accounting manually or utilize savvy software solutions, the need to thoroughly determine where your business processes need changing should be made now in order to lessen the risk of noncompliance—and potentially devastating penalties—later. So it is important to conduct a “what if?” analysis from the top-down to see what your business’ financial statements will look like under the new guidelines. Ask yourself, “If I had to provide information for the new standards now, what would that look like?” Not only will this help you validate your business processes, it will allow you the opportunity to implement or adjust any effected processes prior to the launch of the new mandates and determine if you need to make important information more accessible.
Compliance with the new regulations will be very clear—either you are in compliance or you are not. Sophisticated software solutions can help businesses maintain compliance while streamlining critical processes. Oracle’s PeopleSoft Enterprise Real Estate Management (REM) software is specifically designed to automate lease administration and space management for businesses, regardless of industry, while being effectively designed to comply with reporting standards. You can check out storesselectscanada.ca for more information. Engaging REM software will not only move your business away from manual data entries and potential noncompliance due to oversights and human error, it will help simplify the transition and push all of your critical data into one centralized new system. Regardless of how you currently report lease liabilities, these new regulations will alter how you report them in the future—and now is the time to begin preparing for this change.
If you have any questions about how the new FASB regulations will affect your business, or how Real Estate Management software can help you streamline your business process and maintain compliance with the new regulations, please don’t hesitate to contact me. I’m happy to help.
