On Nov. 10, the Financial Accounting Standards Board (FASB) considered a request for a further two-year delay in the effective date of ASC Topic 842, Leases, for entities which have not yet adopted the new standard. The board voted 7-0 to not provide an additional deferral of ASC 842’s effective date. With this decision, the effective date of ASC 842 for generally private companies and certain not-for-profit organizations will remain fiscal years beginning on or after Dec. 15, 2021. So, for calendar year-end reporting companies, this means 2022.

With the effective date now locked in, what should you be doing now? The first thing to do: Plan. You should plan to assure that your population of leases is complete. Then, plan for how you will calculate the cumulative effect adjustment related to the adoption of ASC 842.

While late in the game, effective planning around these two critical items is necessary to ensure an effective implementation. Remember, all the calculations to record the cumulative effect adjustment don’t need to be completed as of Jan. 1, but the data necessary for it needs to be as of Jan. 1. This means that you need to have the discount rate (remember to consider the guidance in recently issued ASU No. 2021-09 on use of the risk-free rate), the payment stream, including consideration of residual value guarantees, and the tools to do this calculation as of Jan. 1.

Spreadsheets work but lease accounting software might be better. Lastly, don’t forget about the “package of three” transition practical expedients, which, for virtually all entities will make the transition earlier. Though time is short, there is still an opportunity to make the transition as painless as possible.

Obviously, new leases entered into after the effective date must follow the ASC 842 guidance. Don’t forget to consider how you will develop the new disclosures related to remaining term and discount rate that will be required for year-end financial reporting.

Surgent Accounting and Finance has a variety of courses with review of the ASC 842 model and that are invaluable in assisting accounting firms and companies with enhancing their understanding of the new guidance. Live webinar courses include Lease Accounting: The Impact of Changing Standards on Both Lessors and Lessees (AALL), Examining the New Lease Accounting Standard: More Than Meets the Eye (NLS4), and Monthly Accounting and Auditing Update (MAAU). Self-Study options are available, too.

The key is to act now and make use of the remaining time available to assure a successful transition to ASC 842.