The Financial Accounting Standards Board (FASB) officially voted to approve delaying the effective date for a number of significant accounting standards for private companies and nonprofit organizations from December 15, 2019 to December 15, 2020. Included in these proposed changes is Accounting Standards Update (ASU) No. 2016-02, Leases (2021 calendar year). This is a one-year deferral of the effective date.
The delay comes on the heels of the FASB receiving a letter from the AICPA Technical Issues Committee, requesting such a delay. FASB took up the matter on July 17, 2019, allowing for public comment over a 30-day period.
Private companies now have more time to prepare for the most significant accounting change in 40 years. Industry experts at CoStar Real Estate Manager recommend the time be put to good use.
“Many public companies underestimated the time needed to gather lease data and get it into a proven system that can handle the complex calculations required to meet the new ASC 842 standard,” said Matt Waters, CPA and director of lease accounting with CoStar. “Even with the one-year delay, private companies should not slow down their efforts to understand the requirements and get various department stakeholders involved in the compliance project.”
A major challenge in implementing the new lease standard is the amount of work needed to review lease contracts and identify what qualifies as a lease. Many companies that have started this effort are realizing there is much more work to do to capture all the lease data than they initially believed. “This extra time will help companies identify the entire population, especially embedded leases in service contracts,” Waters said.
Additionally, CoStar Real Estate Manager recommends companies evaluate lease accounting software proven to work for public companies, most of which implemented solutions to meet the earlier FASB compliance deadlines required for public companies. Such solutions should ideally include comprehensive real estate and equipment lease management functionality to optimize the business value from the compliance-driven investments. “Private companies should rely on the feedback and experience of their accounting advisors and other private companies to quickly narrow down software vendors who have proven functionality and additional features to ensure a continuous flow of accounting processes,” Waters added.
For more information and to download a whitepaper on Enterprise Lease Accounting Lessons Learned, please visit www.costarmanager.com.
About CoStar Group, Inc.
CoStar Group, Inc. (NASDAQ: CSGP) is the leading provider of commercial real estate information, analytics and online marketplaces. Founded in 1987, CoStar conducts expansive, ongoing research to produce and maintain the largest and most comprehensive database of commercial real estate information. Our suite of online services enables clients to analyze, interpret and gain unmatched insight on commercial property values, market conditions and current availabilities. LoopNet is the most heavily trafficked commercial real estate marketplace online with 5.8 million monthly unique visitors. Realla is the UK’s most comprehensive commercial property digital marketplace. Apartments.com, ApartmentFinder.com, ForRent.com, ApartmentHomeLiving.com, Westside Rentals, AFTER55.com, CorporateHousing.com, ForRentUniversity.com and Apartamentos.com form the premier online apartment resource for renters seeking great apartment homes and provide property managers and owners a proven platform for marketing their properties. CoStar Group’s websites attracted an average of over 52 million unique monthly visitors in aggregate in the second quarter of 2019. Headquartered in Washington, DC, CoStar maintains offices throughout the U.S. and in Europe and Canada with a staff of over 3,900 worldwide, including the industry’s largest professional research organization. For more information, visit www.costargroup.com.