Top Practices for Effective Processes and Controls under ASC 842

Transitioning to ASC 842, the new lease accounting standard has presented many organizations with the challenge of implementing and maintaining effective lease accounting processes and controls. Ensuring accurate financial reporting and compliance with ASC 842 is essential for businesses. 

Here are a few processes and controls you can implement and see how gaapRT can make the process seamless. 

Establish a Centralized Lease Repository

One of the first steps in implementing ASC 842 is to create a centralized repository for all lease agreements. This allows for better organization and management of leases, making it easier to track lease terms, payments, and other relevant data. A centralized lease repository also helps to ensure that all lease-related information is readily accessible and up-to-date. gaapRT's File Manager is a reliable place to begin compiling your Lease Repository.

Develop a Comprehensive Lease Accounting Policy

Creating a comprehensive lease accounting policy that clearly outlines the organization's approach to applying ASC 842 is crucial. The policy should include guidance on lease classification, measurement, recognition, presentation, and disclosure requirements. Having a well-defined policy helps to promote consistency and accuracy across the organization, making it easier to adhere to the new standard. gaapRT's Policy Hub allows you to store and share your accounting policies with the rest of your organization.

Implement Robust Internal Controls

Strong internal controls are essential for maintaining accurate lease accounting records and ensuring compliance with ASC 842. Critical controls may include:

1. Segregation of duties: Separate responsibilities for lease initiation, approval, and accounting to reduce the risk of errors or fraud.
2. Regular lease reconciliations: Conduct periodic reconciliations between the lease repository and financial records to identify and resolve discrepancies.
3. Lease modification and termination controls: Establish processes for handling lease modifications and terminations, including proper documentation and accounting treatment.

Invest in Lease Accounting Software

Leveraging lease accounting software like gaapRT can streamline the management of leases, automate calculations, and simplify compliance with ASC 842—gaapRT offer features such as automated lease classification, present value calculations, and disclosure reporting. As a result, gaapRT can save time, reduce errors, and improve lease accounting processes.

Provide Ongoing Training and Support

Ensuring that your team is well-versed in ASC 842 requirements and your organization's lease accounting policy is critical for maintaining effective processes and controls. Provide regular training sessions and support resources to help employees stay current with the latest lease accounting guidance and best practices.

Continuously Monitor and Improve Processes

Regularly review and assess your lease accounting processes and controls to identify areas for improvement. Continuously monitoring your processes can help identify potential issues before they escalate and ensure that your organization complies with ASC 842.

Establishing a centralized lease repository, developing a comprehensive lease accounting policy, implementing robust internal controls, investing in lease accounting software, providing ongoing training and support, and continuously monitoring and improving processes is key to ensuring accurate financial reporting and compliance with the new lease accounting standard.

Implementing and maintaining effective lease accounting processes and controls under ASC 842 may seem daunting, but with gaapRT, organizations can successfully navigate the transition by following these best practices. 

Head over to gaapRT.com to request a demo!