What are the Requirements of ASC 842?
The primary objective of ASC 842 is to increase transparency and comparability in financial reporting related to leases. It requires lessees to recognize lease liabilities and right-of-use assets on their balance sheets for most leases including operating leases with a term greater than 12 months. Additionally, lessors must classify leases as either sales-type, direct financing, or operating leases, with specific criteria determining each classification. The standard mandates expanded disclosure of lease-related information in financial statements and related notes to ensure transparency.
How to Remain Compliant with ASC 842
To remain compliant with ASC 842, companies need to implement a structured approach that involves identifying and assessing all lease agreements both as lessees and lessors to accurately record lease liabilities and corresponding right-of-use assets. This entails capturing lease terms, determining appropriate discount rates, and regularly reassessing variables for changes. Robust internal controls and data management systems are essential to ensure accurate data collection and financial reporting.
In addition, companies must enhance their financial statement disclosures to provide comprehensive information about lease obligations, facilitating transparency and compliance with the standard's disclosure requirements. Regular training for personnel involved in lease management and accounting, as well as staying informed about updates or amendments to the standard, is crucial for ongoing adherence to ASC 842.
What is Lease Accounting Software?
Lease accounting software is specialized software designed to help property owners and organizations manage their leases and remain compliant with national accounting standards. It centralizes lease data, tracks critical dates and lease modifications, ensures compliance with accounting standards like IFRS 16 and FASB ASC 842, generates financial reports, and simplifies lease payment processing. This software is particularly valuable for businesses with numerous lease agreements, helping them accurately record lease-related expenses, assets, and liabilities on their balance sheets while ensuring compliance with regulatory requirements.
How to Find the Best ASC 842 Lease Accounting Software
Finding the best ASC 842 lease accounting software involves a comprehensive evaluation of features, scalability, user-friendliness, integration capabilities with existing systems, compliance with the ASC 842 standard, and customer support. Prioritize solutions that offer robust lease data management, tracking of lease terms and changes, accurate financial reporting, and effective disclosure management. Consider user reviews and industry reputation to gauge reliability and performance.
Features of ASC 842 Software
Lease Administration and Lease Management
Using a centralized and compliant lease management and lease accounting software, you can streamline processes and proactively resolve errors before they become significant concerns. The Lucernex tool can also track changes to your lease portfolio so you can stay on top of changes in your leases, contracts and terms.
Automated, Audit-Ready Closes
At the end of the month, it can be hard to reconcile information and complete the monthly close process. Lucernex features like cause of change reports, data integrations and automated workflows and reporting can simplify the monthly close and reduce time spend on month-end tasks.
Comprehensive Integrations and Centralized Data
Using flat file secure transfers or REST API, Lucernex can integrate with your existing tools and systems. This can help drive data-driven insight and facilitate ASC 842 compliance. Common integrations include:
- ERPs like Oracle and SAP
- Accounting systems
- BI tools
- Financial management systems
- Human capital management systems
- CMMS or FM solutions
Comprehensive Internal Controls
Maintaining data security, privacy and integrity is especially important when it comes to your financial information. Lucernex offers many internal controls to ensure this data integrity, including:
- Data entry validation protocols
- Full audit trails
- Role-based access controls
Automatic Compliance with All Lease Accounting Standards
Lucernex is verified as a compliant solution by a leading independent 3rd party accounting firm for not only ASC 842 but also IFRS 16 and GASB 87 standards. This can reduce audit risk by enduring that that your company can not only enter compliance but also maintain it as standards continue to change.
SOC 1 and SOC 2 Report Compliance
System and Organization Controls (SOC) reports are reports issued by third-party CPAs that help establish credibility of service providers. They establish credibility based on five categories: security, availability, processing integrity, confidentiality and privacy.
There are three types of SOC reports, though SOC type 1 and SOC type 2 are most relevant for lease accounting software.
Lucernex is compliant with both SOC 1 and SOC 2, so you can be sure you’re working with a trustworthy software.
Improved Forecasting Capabilities
Comprehensive, integrated reporting and analytics will allow your organization to effectively forecast, budget and allocate funds. This can save time, money and efficiency over time.
Benefits of ASC 842 Lease Accounting Software
Simplify Compliance Processes with ASC 842, IFRS 16 and GASB 87
There are many issues that come with choosing the wrong lease accounting compliance tool, including failed implementations, unforeseen costs and limited functionality. Dealing with these issues can make it difficult to maintain compliance with ASC 842, IFRS 16 and GASB 87.
Lucernex has a 100% success rate getting clients into compliance. The tool also offers integrations, ongoing training and audit logs that assist organizations in achieving SOX compliance, SOC 1 and SOC 2 compliance.
Streamline Document Management
Use Lucernex ASC 842 software to get comprehensive, easily accessible access to all of your important information, including your portfolio of leases, your contracts and all related documents.
To further streamline document management, you can create alerts to remind team members of important dates or to let people know when a document is ready for auditing or review.
Secure Your Sensitive Data
Cybersecurity threats are a real concern and this is a particularly relevant threat when it comes to sensitive financial information. In this context, tools like Excel and Google Sheets just aren’t secure enough. Lucernex can help maintain data security by providing:
- Penetration testing
- Encryption: AES-256, TLS 1.2
- Dynamic application security testing
- Authentication - SAML 2.0, JWT
- Key management
- Role-based access controls