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What is FASB?
FASB, or the Financial Accounting Standards Board, is responsible for setting accounting standards in the United States. And while FASB standards are not always required by law, they are generally accepted as best practices by businesses and accounting professionals.
So what do FASB standards have to do with lease accounting software? Well, let's take a look at two of the most important FASB standards for leases:
FASB Accounting Standards Codification 842 - This standard, which went into effect in 2019, requires businesses to recognize lease assets and liabilities on their balance sheets. In other words, businesses must now "show" their leases, rather than just "tell" about them in footnotes. This provides greater transparency into a business's financial position and can help investors and other stakeholders make more informed decisions.
So how can lease accounting software help businesses comply with these standards? First, many lease accounting software programs are designed to automatically generate balance sheet and income statement entries for each lease. This can save businesses a lot of time -
The ASC 842 Standard
If you are in the lease management world, you probably have heard about ASC 842. ASC 842 is the Financial Accounting Standards Board (FASB) guidance we just covered, which will impact how all organizations account for and report their leases.
Why Was the ASC 842 Standard Introduced?
The main goal of this new guidance is to increase transparency and comparability among companies by requiring organizations to include both right-of-use assets and lease liabilities on the balance sheet. The new guidance will also require companies to provide more information about their leases in the footnotes to their financial statements.
Frequently Asked Questions about ASC 842
So, now you know what ASC 842 is. Now, why is it important? Some frequently asked questions about ASC 842 include:
What is a right-of-use asset?
- A right-of-use asset is the rights to use an underlying asset for the lease term.
What is a lease liability?
- A lease liability is the obligation to make lease payments arising from the lease contract.
How will this new guidance impact my company’s financial statements?
- The new guidance will impact your company’s balance sheet and income statement. On the balance sheet, companies will be required to record a right-of-use asset and a lease liability for all leases with terms greater than 12 months. On the income statement, companies will recognize lease expense for both finance and operating leases using a straight-line method.
What disclosures will be required under the new guidance?
- The new guidance will require companies to disclose information about their leases, including the total amount of lease payments, the weighted-average remaining lease term, and the weighted-average discount rate.
What are some of the challenges associated with implementing the new guidance?
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Challenges associated with implementing the new guidance include:
- Identifying and categorizing all leases
- Determining the appropriate discount rate
- Separating the components of lease payments
- Calculating the straight-line expense
- Providing disclosures in the financial statements
What is FASB Lease Accounting Software?
As you can see, companies face many challenges when looking to implement new FASB guidances. It becomes extremely hard for public or private companies to keep track of a large number equipment or property, especially when running a big enterprise with a lot of moving pieces. This is why lease accounting software is a key tool. You might be asking, "What is lease accounting software and what does it do?" We’ll explain.
Can My Lease Accounting Solution Keep Me in Compliance?
As we mentioned earlier, a lease accounting solution like iLeasePro can help businesses stay in compliance with updated FASB guidelines and whatever new lease accounting standard is released in the future. Lease accounting software is a tool that helps businesses manage their leases and stay compliant with the latest accounting standards. The software includes features like:
- Generating journal entries
- Storing lease documents
- Calculating amortization schedules
- Determining the appropriate discount rate
- Creating disclosure templates
- Providing support and training
If you’re looking for a lease accounting software solution that can help your business stay compliant with the latest standards, we recommend our solution, iLeasePro.
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What is iLeasePro?
iLeasePro is a cloud-based software solution that includes all of the features we mentioned above, plus much more. Our software is designed to help businesses manage their leases, stay compliant with the latest accounting standards, and save time and money.
Change The Way You Approach Lease Management
Contact the team at iLeasePro if you want to change the way you think about lease accounting forever. As a business owner or decision maker, you want the best lease accounting software available. Our solution is perfectly priced to support a small to mid-market company
You also want a team that’s passionate about making the software work for you, which is exactly what you’ll find with us. We want to help you take control of your lease accounting process so you can focus on running your business.
To learn more about our software Schedule A Demo Now to learn more.