Professional Service Firms - Are You Ready for the Implementation of the New Lease Standard? What Are the Five Key Questions to Ask?

Professional service firms will be required to adopt Accounting Standards Update (ASU) 2016-02 Topic 842 - Leases (ASU 2016-02) in the upcoming years.  ASU 2016-02 is effective for periods beginning after December 15, 2019 for nonpublic entities and after December 15, 2018 for public entities and nonprofit entities that are conduit bond obligors in over-the-counter markets.

Ask yourself the following five questions in order to prepare for the implementation of ASU 2016-02:

  1. Does the company have a complete population of the leases that the company has entered into?
  2. Does the company have the system or tracking capabilities to capture the various components of each lease?
  3. Has the company begun to have conversations with outside third-parties and users of the financial statements?
  4. Has the company considered the effect on debt covenants once the standard has been implemented?
  5. Has the company begun to evaluate the practical expedients available during implementation?

ASU 2016-02 may have a significant impact on professional service firms.  Companies should consider the impact by starting to address the five questions above to determine the impact on their financial statements.

After the questions have been asked and answered you might want to take a look at simpLEASE Accounting, a tool developed by Schneider Downs that has been specifically designed to help companies manage leases under ASU 2016-02.

For more information, please contact the Schneider Downs audit department and download a copy of the Schneider Downs lease accounting whitepaper.

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The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at contactSD@schneiderdowns.com.

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2019 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

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