Accounting Rules for Leases
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Jen: This is the PKF Texas Entrepreneur’s Playbook. I’m Jen Lemanski, this week’s guest host, and I’m here today with Chip Schweiger, an Audit Director and a member of the PKF Texas SEC team. Chip welcome back to the Playbook.
Chip: Thanks Jen, good to be here.
Jen: So I’ve heard there’s new accounting rules for leases, tell me about that.
Chip: The FASB established new guidance, referred to as ASC 842, for the accounting for leases that was previously covered under ASC 840. For public companies the new rules are generally applicable in 2019 and now require on balance sheet recognition of lease assets and liabilities as well as enhanced disclosures and increased transparency of leasing activities across organizations.
Jen: That sounds like a really important change. What are we telling our clients about it?
Chip: The most important thing is to start getting on this early and often.
Jen: Yeah, I like that.
Chip: We see a registrant’s implementation plan as involving three parts. One, identification of all leasing arrangements, whether the company is the lessee or the lessor – I call it sizing the breadbox. Two, application of the new rules under ASC 842 to each lease identified in step one to include insuring information for the required quantitative and qualitative disclosures. And three an ongoing data management of leasing activity for periodic financial reporting in the future. Technology would be a big help here Jen.
Jen: Chip thanks for being here, we really appreciate it.
Chip: Absolutely, my pleasure.
Jen: For more about this topic visit our SEC Desk on PKFTexas.com. This has been another Thought Leader production brought to you by PKF Texas the Entrepreneur’s Playbook.