By Adam Schrom, SCB Contributor | Originally posted on: SupplyChainBrain.com
The Financial Accounting Standards Board’s new lease-accounting standard, ASC 842, went into effect for public transportation and logistics companies last year. FASB recently proposed extending the deadline for private companies for one year to annual periods beginning after December 15, 2020, which, as of August 2019, was still undecided. The new rules replace ASC 840, which has been used for more than 40 years, and changes the way businesses must account for finance (capital) and operating leases, moving almost all leases to the company balance sheet.
Previously, operating leases could be reported as a footnote in corporate financial statements, not affecting the balance sheet. These new reporting requirements are a fundamental change in the way businesses must now account for their lease obligations, and can have a significant impact on lease-versus-buy decisions as well as company financial statements. Even for public companies that made it through the first year of compliance, many are still struggling with developing repeatable processes to ensure continued compliance.
Transportation and logistics companies face significant challenges to ASC 842 adoption and compliance, due to the extensive and diverse types of lease assets that are central to the business. Everything from vehicle and equipment leases to leased storage units, airplanes, and ships will be affected by the change. According to the International Accounting Standards Board, companies are expected to bring upwards of $3 trillion in operating leases onto their financial statements due to the new accounting rules.… Read More