New ASC 842 Leased Assets Federal Requirements – Are You Ready?
How is your organization preparing for the upcoming Lease Accounting changes that will take effect in 2019 for public companies and in 2020 for private companies? The time is fast approaching and organizations will also need to restate prior year statements as well. Have you created a transition approach? PeopleSoft is well under way to updating Lease Administration to meet the new accounting standards and the latest version is available now to assist your organization in the transition. This blog will cover the necessary high level steps needed to transition your organization’s lease & asset data from the current accounting standards to the upcoming standards.
PeopleSoft’s roadmap to update Lease Administration is in the following 4 phased approach. With Lease Administration phase 3 now officially available in PUM 24, organizations can now begin tracking their leased asset data with the new data requirements. Then when Phase 4 is available and the new lease accounting standards take effect, organizations can be fully ready.
Given these upcoming lease accounting changes, what can your organizations do now to be fully prepared when those changes take effect?
- Identify all your leases and identify all the related assets for those leases. In many organizations managing leased assets is decentralized, so the first key step is to consolidate those lists now and have all your leases and related assets on a single list. Align the upcoming accounting standards to all your leased assets. Under the current accounting standards, you may not be tracking all the underlying asset data needed to support the new accounting standards such as useful life, asset category and residual value, etc. All this newly required asset information can now be stored in PeopleSoft Lease Administration and be fully available when the new accounting standards take effect. By assembling this information now, your organization will have all the required data it needs in place to start assessing the impacts on its financial statements.
- Next is know your business processes. Under the current accounting standards your organization is probably only gathering the lease & asset data that is needed to facilitate payments. But looking ahead you will need to expand the lease & asset data that you track. For most organizations, this should not be a big factor and can be simply addressed by adjusting the current business process to accommodate the new data elements. For some organizations, this might require moving from a decentralized to centralized business process model and this scenario will require a bit more effort. The key here is to leverage your current business process, create a baseline for your current data and then build a transition a plan for the new process model.
- Now that your new lease & asset data is in place and your business processes defined, you will now be ready to begin working with the latest updates in PeopleSoft Lease Administration. To support the new accounting standards, Lease Administration is being designed to provide all the required journal entries for capitalizing your leased assets, creating the associated liabilities, recording depreciation and amortization as required and drawing down the liabilities. As part of the transition your organization will need to understand its current general ledger balances for the underlying assets & liabilities, and then understand how those balances will be impacted when the new standards take effect.
- Know your reporting requirements. PeopleSoft Lease Administration will provide delivered reports to support the upcoming changes. By understanding your organization’s specific reporting requirements, this will allow your organization to best tailor these reports to meet its needs.
In closing, as your organization begins preparing for the new lease accounting standards, transitioning to the new standards at first may seem a bit intimidating. However, through proper planning and using the above steps as a guide, your organization will be fully prepared for this transition.
Thank you for reading and be sure to read our other Lease Administration Blogs.
Steven Brenner, CPA
Senior Principal Consultant
MIPRO Consulting
