">
BlogBanner.jpg

ASC 842: FASB provides an additional optional transition relief for companies

Posted by Julio Dalla Costa on Tue, May 22, 2018 @ 03:19 AM

LeaseAdministration-HotTipOn January 5th, 2018, the Financial Accounting Standards Board (FASB) proposed adding an optional transition method and another practical expedient for lessors to Accounting Standards Codification (ASC) 842, Leases, to reduce the cost and complexity of implementing the new standard.

With the proposed transition option, the FASB is responding to concerns raised by entities, particularly those that plan to implement new systems to comply with the guidance. These entities said that the current requirement to apply the new leases standard to the comparative periods presented in the year of adoption would be more costly and complex for them to implement than the FASB initially anticipated. 

FASBlogo

On March 7, 2018, the FASB approved the changes to the comparative reporting transition guidance, providing an optional transition method when adopting Topic 842.

So, what does this mean?

For many companies who recently implemented ASC 606 and used the modified retrospective approach had to recast their financial statements to the earliest periods presented. This meant that they had to go back two years to the earliest reporting period presented and incorporate the changes into the transition entry to retained earnings as the date of implementation.

At its November 29 meeting, the FASB proposed allowing entities the option to instead apply the provisions of the new leases guidance at the effective date (e.g., January 1, 2019), without adjusting the comparative periods presented. In the case of the adoption of ASC 842, if companies were to adopt on 1/1/2019, that means that companies would have to recast fiscal years 2017 and 2018 for the adoption of ASC 842.

For example, a calendar-year entity that adopts the standard on 1 January 2019 and presents two years of comparative financial statements applies the transition provisions on 1 January 2017 (i.e., the beginning of the earliest comparative period presented). Under the proposed transition method, the entity would apply the transition provisions on 1 January 2019 (i.e., the effective date).

Under the proposed new method for transition, companies will be allowed to continue using and presenting operating leasing under ASC 840 and then prospectively adopt ASC 842 on 1/1/2019. The proposal could simplify transition to the new guidance. For example, a lessee would not have to measure and recognize leases that expired prior to the effective date or consider the effects of each modification for leases that were modified more than once during the comparative period presented. Under the proposed transition method, entities could opt to continue to apply the legacy guidance in ASC 840, Leases, including its disclosure requirements, in the comparative periods presented in the year they adopt the new leases standard.

Entities that elect this option would still adopt the new leases standard using a modified retrospective transition method, but they would recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption rather than in the earliest period presented. Entities would still be required to apply different recognition and measurement requirements in the post-adoption period to leases they entered before adoption and those they enter after adoption.

Group of three practical expedients

In addition to the optional relief proposed by the FASB, there was already the “group of three” practical expedients that was previously proposed and approved. The practical expedients apply to all leases in place at the time of transition. However, the practical expedients must be applied as a package.

The practical expedients are:

  • An entity need not reassess whether any expired or existing contracts are or contain leases.
  • An entity need not reassess the lease classification for any expired or existing leases (that is, all existing leases that were classified as operating leases in accordance with Topic 840 will be classified as operating leases, and all existing leases that were classified as capital leases in accordance with Topic 840 will be classified as finance leases).
  • An entity need not reassess initial direct costs for any existing leases.

ASC842-TransitionExpedients

In addition, the standard provides this practical expedient which may be elected separately from the above:

An entity also may elect a practical expedient, which must be applied consistently by an entity to all its leases (including those for which the entity is a lessee or a lessor) to use hindsight in determining the lease term (that is, when considering lessee options to extend or terminate the lease and to purchase the underlying asset) and in assessing impairment of the entity’s right-of-use assets. This practical expedient may be elected separately or in conjunction with the practical expedients noted above.

Summary:

By the additional optional transition method as well as the practical expedients, companies are being provided with significant relief for the adoption of ASC 842. However, companies that rely extensively on leases for operating assets, the transition is likely to be labor intensive even when applying the practical expedients.

 

 Rapid Leasing Compliance Solution Click Here to Learn More

Read More

Topics: leasing, FASB, Leasing-Hot-Tips, ASC842, SAPLeaseAdmin

New Rapid Compliance Solution for Lease Accounting Standards ASC 842 and IFRS 16

Posted by Bramasol Leasing Administration Team on Tue, May 15, 2018 @ 12:00 AM

LeaseAdministration-HotTipBramasol, the leader in compliance and finance innovation solutions, has announced a new, purpose-built product that reduces complexity and implementation costs, to give companies across a variety of industries a ready-to-deploy solution for lease accounting disclosure reporting and compliance.

In 2016, the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) issued new standards for lease accounting: IFRS 16 & ASC 842, which must be implemented by 2019. Both IFRS 16 and ASC 842 are the result of a joint effort between the IASB and FASB to meet the objective of improved transparency, comparability and financial reporting.  These changes will impact virtually all companies, whether lessors or lessees.

Since the new leasing standards-setting process began, Bramasol has been at the forefront of addressing critical issues to help our customers get ready for both IFRS 16 and ASC 842. We have developed the Lease Administration Solution Engagement Roadmap (LASER) that brings together all compliance requirements, stakeholder needs and work-stream processes within a unified and disciplined implementation process.

The Rapid Leasing Compliance Solution further distills these overall efforts in a targeted solution, designed to help companies with straightforward leasing portfolios to cut through the complexity of the new standards and achieve compliance without excessive hassles or expense.

This purpose-built offering is designed for companies with up to 300 leases and includes:
- 5 Basic Scenarios for Real Estate, Movables, or both
- Set-up of Nakisa and/or RE/FX
- Standard data & document loading
- Security set-up
- Standard out-of-the-box disclosures and reports for ASC 842 or IFRS 16

Click Here to see more details on Rapid Leasing Compliance Solution

Rapid-Compliance-banner-social-new

 

Read More

Topics: Leasing-Hot-Tips, ASC842, SAPLeaseAdmin, IFRS16, RLCS

Join SAP Leasing User Group Meeting at EXXON, May 3, 2018

Posted by Bramasol Leasing Administration Team on Mon, Apr 30, 2018 @ 11:11 AM

LeaseAdministration-HotTipSAP Leasing User Group

Hosted by ExxonMobil
(Options for In-person or Online Attendance)

May 3, 2018 - 10 AM PDT / 1 PM EDT

Join us for the latest SAP Leasing User Group Meeting hosted by ExxonMobil, Bramasol and SAP. Pete Graham will chair a robust discussion on the latest issues and challenges on SAP Leasing Solutions. Solution and Accounting experts from Bramasol and Nakisa will be onsite to provide additional insights into the product and project based experience.

If you are looking for real answers on how you can use the SAP solutions to comply with ASC 842 and IFRS 16, then this is the place for you. The discussion will include ample opportunity for open Q&A to allow participants to get answers to specific questions.

Please join us in person at ExxonMobil for what promises to be a great meeting. 

ExxonMobil Global Services Company
22777 Springwoods Village Parkway (W1.4A.345) 
Spring, Texas USA 77389

This will be available both in person and as a remote dial-in for those who cannot attend in person.

Register Here to Attend Online 

If you plan to attend in person, please email your Name, Email and Company to jfroelich@bramasol.com and we will add you to the list.

LeaseAccounting

Looking forward to seeing you there!

Read More

Topics: Leasing-Hot-Tips, SAPLeaseAdmin

Companies Brace To Put Leases On Balance Sheets

Posted by Bramasol Leasing Administration Team on Mon, Mar 12, 2018 @ 04:17 AM

LeaseAdministration-HotTip.jpgThis recent article in Global Finance provides an excellent overview of challenges facing companies regarding compliance with new Lease Accounting standards, ASC 842 & IFRS 16, "Companies Brace to Put Leases on Balance Sheet".

Some highlights from the article are as follows:

"It’s not just 2019-and-forward numbers that need to be stated. The standards also require restatement of prior years’ balance sheets. While the international standard requires all leases to be clearly delineated, the US GAAP standard parses some fine points, exempting many small-value or short-term leases. It also exempts leases of intangibles, mineral rights, inventory, timber and assets under construction."

"Restating the books won’t be a fully automated task. Even technologists acknowledge that there’s no downloadable magic wand that will move the leases from the footnotes into the accounting equation.

The difficulties start, as they often do, with the data gathering phase.

“Most companies don’t have this end of the enterprise electrified,” says Pete Graham, SAP’s director of finance solutions and mobility. “Most lease data still resides in paper contracts.”

He cites the transportation, retail, pharma and oil-and-gas sectors as the ones most impacted by the accounting changes. They, presumably, become the ones that will need to explain the new guidance to the stock analysts and rating agencies."

So, where do you go from here?

As a recognized industry innovator in transformative Office of the CFO solutions and the clear leader in helping companies implement recent major changes to Revenue Recognition standards, Bramasol has now also jumped out ahead of the curve to create strategic and tactical implementation solutions for ASC 842 and IFRS 16 lease accounting changes.

All companies, whether lessors, lessees or both, need to leverage the process of changing their lease management methodologies. This will allow them to gain better visibility of their lease portfolios, streamline the process of lease management and reduce overall costs.

Our holistic approach assures Compliance with the new standards while also providing a structured solution for Optimization of all lease administration and portfolio management and an integrated system for Transformation of how leasing is handled within overall end-to-end business processes.

Companies Brace To Put Leases On Balance Sheets_blog-graphic-12-mar-updated.jpg

For more information, visit the Bramasol Leasing Solutions web page.

 

Read More

Topics: Leasing-Hot-Tips

FASB Update to ASC 842 Provides Relief on Easements and Rights of Way Accounting Methods

Posted by Bramasol Leasing Administration Team on Sun, Feb 18, 2018 @ 05:25 PM

LeaseAdministration-HotTip.jpgAs the January 2019 deadline for implementing new lease accounting standards (ASC 842 and IFRS 16) approaches, FASB has been addressing a number of issues that arise with regard to transitioning from current regulatory practices to the new standards. 

As part of this evolutionary process, FASB has issued Accounting Standards Update 2018-01 "Land Easement Practical Expedient for Transition to Topic 842".

This update will be of particular importance for industries such  as Oil & Gas, Telecommunications, Utilities and other sectors that traditionally depend heavily on easements and rights of way to conduct their business.

In connection with the FASB’s transition support efforts, a number of stakeholders in these industries have inquired about the application of the new lease requirements in Topic 842 to land easements. Land easements (also commonly referred to as rights of way) represent the right to use, access, or cross another entity’s land for a specified purpose. 

Key provisions of the update are as follows:

"To address stakeholder concerns about the costs and complexity of complying with the transition provisions of the new lease requirements, the amendments in this Update provide an optional transition practical expedient to not evaluate under Topic 842 existing or expired land easements that were not previously accounted for as leases under the current leases guidance in Topic 840.

An entity that elects this practical expedient should evaluate new or modified land easements under Topic 842 beginning at the date that the entity adopts Topic 842. An entity that does not elect this practical expedient should evaluate all existing or expired land easements in connection with the adoption of the new lease requirements in Topic 842 to assess whether they meet the definition of a lease."

Key Points of FASB Update_TuesdayTip_ASC842.jpg

Click Here to Read the Entire Update 2018-01 to Topic 842

Click Here for More Information on Bramasol Lease Accounting Solutions

 

Read More

Topics: Leasing-Hot-Tips

FASB Proposes Improvements to Lease Standard Implementation

Posted by Bramasol Leasing Administration Team on Mon, Jan 8, 2018 @ 05:07 AM

LeaseAdministration-HotTip.jpgOn January 5, 2018, the Financial Accounting Standards Board (FASB) issued a proposed Accounting Standards Update (ASU) regarding the new lease accounting standard ASC 842.

The proposed ASU is intended to reduce costs and ease implementation of the Leases standard for financial statement preparers.  Stakeholders are encouraged to review and provide comment on the proposed improvements by February 5, 2018.

Two key proposed changes in this ASU deal with comparative reporting during the transition period and a practical expedient for simplifying the requirements to separate nonlease components of a contract.  Summaries of the proposed changes are below.

Transition:

"Comparative Reporting at Adoption The amendments in this proposed Update would provide entities with an additional (and optional) transition method to adopt the new lease requirements by allowing entities to initially apply the requirements by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption consistent with the request by preparers. Consequently, an entity’s reporting for the comparative periods presented in the financial statements in which the entity adopts the new lease requirements would continue to be in accordance with current GAAP (Topic 840), including disclosures." 

Separating Components of a Contract:

"The amendments in this proposed Update would provide lessors with a practical expedient, by class of underlying assets, to not separate nonlease components from the related lease components and, instead, to account for those components as a single lease component, if both of the following are met: 1. The timing and pattern of revenue recognition for the nonlease component(s) and related lease component are the same. 2. The combined single lease component would be classified as an operating lease. A lessor electing this proposed practical expedient would be required to disclose the class or classes of underlying assets for which it has elected the practical expedient and the nature of the nonlease components included within the single lease component."

 FASB-Proposes-Improvements-to-Lease-Standard-Implementation.jpg
 
Leases_ASU_380x285.jpg

Read the FASB Press Release Here.

Read More

Topics: Leasing-Hot-Tips

SEC Office of Chief Accountant Urges Careful Planning for Implementing ASC 842 Lease Standard

Posted by Bramasol Leasing Administration Team on Mon, Jan 1, 2018 @ 06:44 AM

LeaseAdministration-HotTip.jpgWith arrival of 2018, many companies are now shifting into a higher gear toward implementation of the new lease accounting standards, ASC 842 and IFRS 16. 

In recent remarks, Michael P. Berrigan, Professional Accounting Fellow, Office of the Chief Accountant, SEC, provided an update on key implementation issues and alerted companies of the importance of careful implementation planning - starting as soon as possible.

Among the issues that Berrigan emphasized were:

  • Identification of contacts that represent or contain a lease is a key step.
    "This step is necessary to fully assess the scope of contracts subject to the new standard. Once the complete inventory of contracts is identified and analyzed, I believe a company can among other items, better assess the additional level of effort required for implementation."

  • Transition guidance differs from the guidance applied on a go-forward basis under ASC 842.
    "I would encourage entities to educate themselves on these differences during implementation and continue to follow the Financial Accounting Standards Board’s (“FASB”) recent standard setting activities to allow sufficient time to gather relevant information to apply both the transition and general provisions of the standard."

  • Careful Implementation Planning, Management and Oversight are Necessary
    "Leveraging lessons observed from the revenue implementation efforts, I encourage entities to plan and manage lease implementation activities to allow for adequate time to formulate reasonable judgments in the application of the standard and evaluate any necessary changes in Internal Control over Financial Reporting (“ICFR”) that will be required to support ASC 842."

Click here to read the full remarks from Mr. Berrigan.

SEC-Office-of-Chief-Accountant-Urges-Careful-Planning-for-Implementing-ASC-842-Lease-Standard.jpg

Click Here to Learn More About Bramasol Solutions for Lease Accounting

 

 

Read More

Topics: Leasing-Hot-Tips

Kick-off Meeting for New SAP Leasing User Group on December 5, 2017

Posted by Bramasol Leasing Administration Team on Mon, Nov 27, 2017 @ 05:07 PM

LeaseAdministration-HotTip.jpgWe are excited to announce the formation of a new SAP Leasing User Group and pleased to invite you to the first online meeting:
December 5, 2107 at 9 AM PST - 12 PM EST.

The purpose of the Leasing User Group is to bring together SAP, customers and partners in a community to share information on the latest features, roadmap and updates on the SAP Lease Administration by Nakisa (Lease Administration) and SAP Real Estate Management (ReFX) solutions.  

You will hear from the SAP product leaders, Pete Graham and Tom Andersen, as well as, Nakisa and others.   Product experts will be on hand to answer your questions live.

Click Here to Register to Attend the Leasing User Group Kickoff Meeting

 SAP-Leasing-User-Group.jpg

Read More

Topics: leasing, Leasing-Hot-Tips

Why Lease Admin Software Must Integrate with Your ERP System

Posted by Bramasol Leasing Administration Team on Mon, Oct 30, 2017 @ 06:16 AM

LeaseAdministration-HotTip.jpgAs companies look ahead to achieving compliance with new lease accounting standards, ASC 842 and IFRS 16, this implementation process also provides an excellent opportunity to significantly improve overall efficiency and effectiveness of enterprise-wide lease administration methodologies.

One of the key opportunity areas is integration between lease administration software and core ERP systems.

Native integration with your existing ERP can provide key benefits, including:

  • Two-way data flows between core ERP system and Nakisa or REFX system
  • Asset accounting, fixed asset, materials and payments flow between ERP system to SLAN and REFX
  • Less customization with minimal maintenance requirement
  • Complete visibility of your leases in the ERP system for easy tracking and traceability 
  • Disclosure reporting for an end-to-end system

Bramasol-ERP-integration.jpg

 

SAP Lease Administration by Nakisa is a purpose built end-to-end lease accounting and administration solution that provides access to company-wide lease data, with the visibility and traceability needed to support and comply with the new regulatory standards.

The SAP Real Estate Management solution is a fully integrated sub component of SAP Finance that
provides a simplified approach to the leasing solution landscape by elimination of complex financial
interfaces, reduction in the number application and real time valuation of finance leases.

Seamless coordination between Lease Administration and Asset Accounting is critical for proper
classification and valuation. By integrating seamlessly with core ERP  platforms, both Lease Administration by Nakisa and, SAP Real Estate Management eliminate any problems with operational silos between these key functions, thereby improving accuracy, auditability and overall administration efficiency. 

As a partner of both SAP and Nakisa, we provide a holistic view to the impact the new Leasing standard will have on your organization. Our methodology and approach helps ensure that you can meet the upcoming changes to the standards. Bramasol works with you to evaluate the system changes needed under the new regulations, determine how significant they will be going forward, and lay out a path toward implementation with an emphasis on the impact to the SAP system. 

For more information on Bramasol's lease accounting services, visit https://www.bramasol.com/solutions/leasing/ 

Read More

Topics: Leasing-Hot-Tips

ASC 842 and IFRS 16 Lease Accounting is Different for Real Estate vs. Equipment

Posted by Bramasol Leasing Administration Team on Mon, Oct 9, 2017 @ 06:33 AM

LeaseAdministration-HotTip.jpgIn 2016, the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) issued new standards for lease accounting: IFRS 16 & ASC 842, which must be implemented by 2019. Both IFRS 16 and ASC 842 are the result of a joint effort between the IASB and FASB to meet the objective of improved transparency, comparability and financial reporting.

These changes will impact virtually all companies, whether lessors or lessees. Regardless of your company's size or industry, under the new standards your balance sheet will be different. 

When putting together your compliance plans for ASC 842 and IFRS 16, it is important to understand that solutions for real estate leases vs. equipment leases require very different features and capabilities.

Real estate leases tend to include specific issues such as tenant improvements, utilities, triple-net expenses, sub-leasing contracts, space utilization tracking, taxes, etc. that are not applicable for equipment leases.

On the other hand, equipment leases have a myriad of potential factors that need to be addressed by lease accounting solutions including, service contracts, maintenance schedules, trade-in options, utilization tracking, re-sale value, etc.

Although the compliance requirements specified in the new standards apply to both real estate and equipment leases, the processes for managing and accounting for these leases need purpose-built solutions.  Some people compare it to choosing the correct bicycle for your planned route.  You wouldn't attempt to navigate a rough mountain trail in a road bike any more than you'd choose a mountain bike to compete in a road race.  Matching the solution to your needs is the best way to achieve success.

That's one reason that, at Bramasol, we have developed deep expertise for implementing and supporting  two purpose-built, best-of-breed, feature-rich solutions: SAP Flexible Real Estate Management (RE-FX) and SAP Lease Administration by Nakisa.  As part of our overall lease administration and accounting initiatives, we have also developed detailed processes for compliance and disclosure reporting for ASC 842 and IFRS 16.

Click here to learn more about Bramasol's Lease Administration solutions and services.

 

Read More

Topics: leasing, Leasing-Hot-Tips

Subscribe via E-mail

Request RevRec Consulting Support
Join the Rev Rec Ready LinkedIn Group

Latest Posts

Follow Me