ASC 842 requires your organization to carefully examine every contract to determine whether it is or contains a lease, to classify the lease portion as either an operating lease or finance lease, and then record it as a journal entry in the general ledger according to its lease type.
For several years now, US non-profit organizations and public and private companies have been required to comply with ASC 842, the latest accounting standard from the Financial Accounting Standards Board (FASB). If you don’t have ASC 842 compliant software, accurate financial reporting takes significantly more time and effort.
Here’s how Tango’s ASC 842 software streamlines compliance.
Key components of ASC 842 software
ASC 842 software is essential for all public and private companies and nonprofits operating in the US. Tango’s ASC 842–compliant software includes a number of key features to help you comply with these guidelines:
- Document consolidation
- Automated ASC 842 calculations
- Automatically generated journal entries
Here’s how these capabilities save time and reduce errors.
Lease document consolidation
When a contract contains both lease and non-lease components, or distinct finance lease and operating lease components, you effectively have to treat them as separate contracts under ASC 842. Many lease accounting solutions address this by creating unique records for each component, making your portfolio even more unwieldy to manage—especially when your landlord wants to treat your agreement as a single contract. Tango Lease, however, ensures your financial records are compliant with ASC 842 without creating the headache of tracking and reconnecting the separate components.
You may also have accounting records that are important to keep associated with each lease, but which you don’t need to disclose. Tango Lease lets you store this additional information with your lease records, while excluding them from disclosure reports.
The more contracts in your portfolio, the harder it is to find the information you need. ASC 842 compliance is already tedious process, but sifting through spreadsheets and folders of documents makes it even more difficult, and leaves more room for error. A dedicated lease accounting solution like Tango Lease ensures that your lease documents stay organized in useful, meaningful ways, so you can find and share the information you need faster.
Automated ASC 842 calculations
Prior to ASC 842, ASC 840 had been in effect for decades, and lease accountants have had to change routine processes they didn’t have to think about before, which can easily lead to costly errors.
By requiring all leases to appear on the balance sheet, whether they’re explicitly labeled a “lease” or embedded in contracts, ASC 842 significantly increased the volume of lease accounting calculations your organization needs to be in compliance. These time-intensive calculations can have several complex steps, and getting them wrong can misrepresent your lease liability on your financial records, leading to audits, fees, and loss of trust from financial institutions.
For example, if a contract contains a lease, even if it’s an operating lease, you may have to calculate the lease liability, right of use asset, incremental borrowing rate, and amortization. Tango Lease can perform these calculations for you, so you just need to plug in the basic lease terms like payments and duration, and you’ll get everything you need for your journal entries. You can get your portfolio in compliance faster, and without errors.
Automatically generate ASC 842 compliant journal entries
Under ASC 842, every lease lasting longer than 12 months, including embedded leases, has to appear on the General Ledger. Journal entries vary somewhat depending on whether they’re operating leases or finance leases. But with ASC 842 software, you don’t have to worry about formatting journal entries or even filling them out.
Tango automatically formats your lease calculations for the General Ledger, so you don’t have to tediously create journal entries from scratch. With this modernized lease accounting software, the meticulous, time consuming process of ASC 842 compliance becomes a simple, straightforward task.
Learn more about Tango’s trusted ASC 842 software
It’s only been a few years since ASC 842 changed the way lease accounting works. And while every US nonprofit and public and private company has been required to be in compliance, that doesn’t mean everyone has fully adjusted to the changes. You have to comply every year, with every contract. But by bringing all your lease documents into Tango Lease, and letting our ASC 842 compliant software perform calculations and automatically generate journal entries, you can save hours of repetitive work, and let your accountants focus on opportunities that require their expertise.
Want to see how Tango Lease helps you comply with ASC 842?