The FASB has issued new guidance that will make it easier to adopt the new leases standard, ASC 842, Leases. Most significantly , additional transition method is now available. Under a new transition method, comparative periods presented in financial statements in the period of adoption will not need to be restated. Instead, a reporting entity would:
● Initially apply the new lease requirements at the effective date (e.g., January 1, 2019 for a calendar year-end public company), and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption
● Continue to report comparative periods presented in the financial statements in the period of adoption under current GAAP (i.e., ASC 840, Leases)
● Provide the required disclosures under ASC 840 for all periods presented under ASC 840 The new transition method does not impact the manner of adoption. An entity will still need to apply the modified transition approach when implementing the new guidance.
UGAAP lease accounting software is the leading on-premise software that does not subject companies to subscription fee, and let customers take control of their own data. Its powerful and flexible lease reassessment/modification functionality plays a critical role in lease standard transition. UGAAP tool not only handles comparative periods reporting with ease, the additional transition method also works extremely well UGAAP lease accounting system. No matter a company who adopts ASC 842 on 1/1/2019 (adoption date) elects to use the earliest comparative period method (transition date would be 1/1/2017), or elects to utilize the newest transition method (transition date would be 1/1/2019, same as adoption date), UGAAP software can easily implement the transition.
We expect most companies will take advantage of the newest transition method. In such case, UGAAP lease accounting software users just need to follow the following steps, all within the lease accounting software:
First, within Lease Detail tabs, input basic lease financial information in the UGAAP system: dates, rents, discount rate, and lease terms ...
Input the probable payment amount of residual value guarantee, if any, and other un-amortized lease general ledger balances under the old lease standard as of 1/1/2019: prepaid rent, lease incentives, initial direct costs, favorable/unfavorable leasehold intangibles, etc.
Run a preliminary amortization schedule.
(ASC 842 only): Run lease classification test. Determine whether to override test result.
(ASC 842 only): Re-run amortization schedule if the lease classification changed from the default value
Sign off / Approve the leases
Run journal entries under Accounting menu for January 2019, and book it in general ledger. January journal entries will include both initial balance set up, and lease monthly entries for the month.
Run various reports to include in your SEC filing documents, to use as backup for account reconciliation, or as support for audit requests.
UGAAP provides a no-question-asked free demo available for download at www.ugaapinc.com. It is in MS Access 2007 - 2016 format. It has been thoroughly tested by CPA professionals. We can't wait to see what you do with it.