ValuD: Finding the budget for FASB lease accounting


All new guidelines come with their fair share of challenges and the FASB leasing standard is no exception – not to mention the associated costs in implementing such mandatory measures. Provisioning for such statutes becomes a prerequisite in such cases and the responsibility is on the organization to come up with additional sources of funds that will be needed to finance these mandatory requirements…

Impact

While the new leasing standard ensures greater transparency for all stakeholders, FASB has made sure that the transition to the new update is relatively less complicated by letting companies use their existing business processes and systems. This is so because the treatment of operating leases in the Income Statement and Cash Flow Statement remain unchanged, which is similar to existing GAAP methodology…

Challenges

One significant financial challenge you might have to face as an organization is the costs of additional personnel to evaluate your lease portfolio. The new leasing standard requires a wide range of information such as lease commencement date, useful life, fair market value, borrowing rate, renewal/purchase options, any space changes during the lease term, landlord allowances, initial costs and impairment charges, if any and so on…

What can be done?

More often than not, updating the IT infrastructure of the organization can be a better solution for most of the challenges posed by such mandatory requirements. An Integrated Workplace Management System (IWMS) software like IBM TRIRIGA can help resolve most of the issues relating to FASB implementation and what’s more, also result in cost savings in the long run…

[Admin: This post is related to the 06.17.16 post about FASB readiness, and the 04.21.16 post about what FASB is.]

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