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7 Essential ASC 842 Best Practices
Let’s face it: there’s no shortage of lease accounting software solutions promising they will get you compliant with the new ASC 842 and IFRS 16 standards. Whether you are a private or public company, FASB ASC 842 requires careful guidance to ensure you have properly accounted for your real estate, equipment and embedded leases.
Here are our 7 standard best practices for selecting a lease accounting vendor gathered from guiding global corporations through to compliance with the new ASC 842 standard.
ONE: Select Lease Accounting Software that is Tried and Tested
Partner with a vendor who has considerable experience providing lease accounting compliance software for both real estate and equipment leases. When engaging in lease accounting software comparisons, note that some software vendors are leveraging their customer base to test the validity, reproducibility and effectiveness of their solution to ensure compliance. You aren’t a guinea pig. You want a lease accounting software solution that has been third party verified to comply with ASC 842, as well as SSAE No. 18 SOC 2, Type 2 verified, and has strong internal control mechanisms to meet Sarbanes-Oxley requirements.
TWO: Partner with the Experts
FASB ASC 842 is complex. From understanding your lease scenarios and what is in your leases today, to defining capital leases, to understanding the data these new standards require, demands true professional advice. Viable solutions have been fully vetted by third-party accounting firms and should be implemented by highly experienced professional services personnel with relevant knowledge and expertise, not technologist or junior resources.
THREE: Keep Your Options Open
Maybe you were told that your ASC 842 software solution was compliant, only to be forced into a new compliance solution because yours is not being upgraded. There’s no need to stress, since your organization must do a full implementation anyway, treat this as an opportunity for a lease accounting software comparison – and search for a solution that fits your compliance strategy. Newer, more sophisticated ASC 842 lease accounting software solutions will address more of your requirements going forward.
FOUR: Pick a Partner to Grow With
Lease accounting software reviews are a great place to begin the search for a partner to help you implement the new standards. Be on the lookout for partners who say the upgrade you need to undertake to ensure compliance will cost as much as it would to implement a full solution. You should probably consider breaking up. Also, a long-term partner won’t nickel and dime you. Key success factors like robust reporting, and support should be part of the deal. If you made a rush decision in choosing a partner and you’re unsatisfied, take this opportunity to compare accounting software vendors and find one that is interested in growing with you.
FIVE: Don’t Pay for Your Own Data
Calculations under the new standard can require up to 75 different data elements across all types of leases – including real estate, equipment and embedded. When you’re looking at a lease accounting software comparison, make sure the vendor you work with will allow you to access your data whenever you like – without paying extra. Also, data is a competitive advantage, so maintaining privacy is paramount. The best lease accounting software vendors won’t leverage your organization’s invaluable data to fuel their businesses
SIX: Two-for-One isn’t a Deal
As soon as the new ASC 842 regulation was published, your lease accounting software vendor may have assured you they would guide you through integration all the way to compliance. The best lease accounting software will come with the module you need, and not require further purchases to achieve compliance. Select a solution that has compliance built right in. Some vendors even require the overlay of a third-party audit firm’s tool to ensure compliance – two solutions is no solution. Vendor due diligence is critical for the FASB ASC 842 /IASB IFRS 16 standards.
SEVEN: Delay, Delay, Delay
Some vendors already have many customers that they need to help get compliant, but their legacy solution can’t hold up to the ASC 842 standards. In this case, vendors may switch you to other tools in their arsenal. The challenge is that with so many customers needing to switch, they simply don’t have the staff to manage the transitions or provide underqualified resources. Not only are existing customers struggling to get access to resources, but new ones are getting left out in the cold – and are no closer to being compliant! Save yourself trouble in the future and compare lease accounting software before buying.
Discover more tips on how to strengthen your company’s ASC 842 compliance strategy by watching our full on-demand webinar.
Tango’s team grew up in the lease administration space and are responsible for building the earliest versions of today’s solutions, as well as implementing lease administration solutions at some of the world’s largest and most recognized retailers and restaurant companies. With more than 20 years of experience in lease administration, we develop, build and implement solutions that help you avoid common pitfalls when it comes to selecting the best lease accounting software for compliance. Tango’s knowledge of lease administration and lease accounting is trusted by companies around the globe.