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ASC 842 leases solutions and support

Our article ‘How to assess the impact of ASC 842 Leases on a UK entity when reporting to group’ gave an introduction to ASC 842 leases and suggestions on how UK subsidiaries may assess the impact of ASC 842 on their leases when reporting to their US parents.

The initial application of ASC 842 leases can be a daunting task, both technically and for the resource capacity that may be required. Below we look at some of the tools and services available to make this process feel more achievable, with a focus on finding an appropriate solution to record data and calculate the relevant accounting entries.

Accounting for leases by a lease - a summary

Leases accounted for under ASC 842 give rise to a right-of-use asset and a lease liability.

ASC 842 retains a distinction between operating and finance leases. The total cost expensed to the profit or loss (interest and depreciation) in respect of the operating lease is unchanged from the amount expensed to the profit or loss under ASC 840. This is achieved by adjusting the amount of depreciation to ensure the charge in the profit and loss account is consistent.

The lease liability is calculated by discounting the present value of future lease payments. The standard requires the discount rate used is the rate implicit in the lease (RIIL). However, if the RIIL is not readily determinable the lessee’s incremental borrowing rate shall be used.

Lease accounting software and models

Having a lease accounting model or software solution plays a key part in the application of ASC 842. The right solution will depend on your requirements and the volume of leases you have.

RSM has analysed the market to determine the capabilities of many solutions, currently in the market and in development, to meet the requirements - as well as handle other components of lease administration.

Our strategic relationships with several key software providers allow us to discuss software options with you. We can assist with the implementation of the chosen solutions to help with data aggregation, data cleanliness, and support that will drive the timeliness and success of the lease data collection effort.

Whether it be software-based or a workbook, it is important that your lease accounting solution provides you with everything you need.

Key considerations when choosing your solution may include:

How RSM can help

Our team has the experience and expertise to:

In addition, we can:

For further information please contact Nicola Whitmarsh, or your usual RSM contact.

authors:nicola-whitmarsh,authors:paul-merris