Schneider Downs, in partnership with the Ohio Trucking Association, is pleased to announce the release of the second installment in our series of trucking industry white papers. The series is aimed at addressing the most critical issues currently facing the trucking industry. This white paper focuses on Accounting Standards Codification (ASC) 842 Leases.
Effective for all private entities for fiscal years beginning after December 15, 2021, ASC 842 requires companies to recognize essentially all long-term leases on the balance sheet. This is a significant change from the prior leases guidance which only required balance sheet recognition of capital leases (operating leases under the old guidance were disclosed and expensed as rents were incurred). Under the new guidance, companies must record a right of use (ROU) asset and lease liability at the present value of lease payments not yet paid. Income statement presentation for subsequent periods will vary depending on a lease’s classification; interest expense and amortization expense will be separately presented for finance (formerly “capital”) leases, and a single lease expense line will be presented for operating leases.
Given the changes noted above (and addressed in greater depth within the white paper), the new standard has the potential to both impact your loan covenants and cause much heartache as you move to implement the new accounting standard. Schneider Downs recommends you begin now to review your loan covenants, inventory the leases across your organization, discuss the impacts with your certified public accountant, and consider the need for a lease software package (if you have at least 10 leases to track).
As you navigate through ASC 842 and find that your organization needs some guidance on the technical aspects of lease accounting, Schneider Downs can help. Schneider Downs has been tracking and anticipating the changes to lease accounting standards over the years and has worked extensively to understand the specifics and intricacies of the standards.
Additionally, Schneider Downs offers simpLEASE, a software program that provides easy-to-understand guidance to analyze each individual lease. The program was developed in conjunction with the accountants at SD, is easy to use and provides accurate analysis for all lease computations. To learn more about simpLEASE visit www.schneiderdowns.com/simplease.
Over the next six months, we will be researching the topics below and providing you with relevant, real-time information you can use to make strategic decisions in your trucking company.
Our Transportation and Logistics professionals possess the most current knowledge of transportation issues, regulations and trends. We work with you to seek innovative ways to reach your strategic goals. For more information visit our dedicated Transportation and Logistics page.
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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.