Common Mistakes To Avoid While Implementing FASB ASC 842

Common mistakes you can avoid while implementing FASB ASC 842

Companies who implemented the new FASB standards can verify the fact that it’s not an easy transition. While they are in the process of learning trial by error, here are five common mistakes companies who are yet to implement the new standards can avoid.

  1.  Prepping for the changes – One mistake that many companies who implemented the new FASB standards have in common is underestimating the scope of changes. Lease accounting and financial reporting changes are significant and these changes are not just confined to the real estate department but also other departments such as operations, accounting & IT. Cross-functional coordination during implementation can prove to be one of the most challenging tasks.
  2. Data tracking and integration – Many companies have relied on spreadsheets to manage their lease data. With the new accounting standards this won’t be practical anymore. Moreover, new data needs to be extracted and the current processes of integrating and maintaining the lease data will be inadequate. Companies need to invest in an updated lease management system to handle the lease data better.
  3. Software vendor – As soon as companies realize they need a better system to manage the implementation, they  often act too quickly in selecting a vendor without the necessary groundwork. Selecting a vendor that does not meet the company’s requirements can do more harm than good. Here are some tips on how to choose the right software vendor.
  4. Recognize the potential demands on your staff – Overburdening the existing staff may delay the implementation process. The decision needs to be made whether to hire additional staff or simply outsource the implementation task to an organization with the expertise and depth to carry out the transition in a timely fashion.
  5. Procrastination is not good – There are many companies who wish they had started sooner because it is a complex process and inevitably, something will go wrong.  Companies should begin allocating the time and resources and put processes in place for the implementation sooner rather than later.

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