Whether we like it or not Accounting Standards Codification (ASC) 842 is here. Labor unions have a lot on their plates and a new accounting standard on leases may not be at the top of the priority list. However, the time is now to implement if you haven’t done so already.
- ASC 842 requires all private organizations, including Labor Unions, to evaluate lease commitments to determine if recording a right-of-use asset and a lease liability is required on the balance sheet.
- The new standard applies to year-ends beginning 12/15/21 or after. Therefore, the new standard is applicable to the 2022 calendar year if your organization has a 12/31 calendar year-end. Labor Unions with a fiscal year-end have an extra year to implement (wouldn’t be applicable until the fiscal year ending in 2023)
- Generally, the new standard would not apply to Labor Unions that report on the Cash or Modified Cash basis.
- Implementing this new accounting rule can be complex and might require more time and resources than many organizations estimate. This is not a one-time exercise and will require changes to accounting processes and financial reporting controls.
- You still have time before the 2022 calendar year end is over. We’ve included a checklist to help.
Making the Transition Manageable for Labor Unions
Changes in this new lease accounting standard will impact organizations differently depending on the number of leases held. The fewer leases held by an organization, the less time will be needed to implement. However, whether an organization has a lot or a little, utilizing a Lease Software program can be a huge time saver and can cost as little as $100 per lease.
For a good summary and assistance in understanding the essentials of this new standard, you can watch the following PBMares webinar: Understanding the essentials
Depending on the size and complexity of your lease portfolio and the expertise of your accounting department, the implementation of ASC 842 may take longer than expected. To save time and stress, don’t wait for your current auditor or accountant to begin asking questions. Being proactive about addressing this change will make the transition easier.
Although implementing this new accounting rule might seem overwhelming, getting a handle on ASC 842 basics and following these steps can make the process quite manageable:
- Make a list of all leasing arrangements. This might include office space leases, copier leases, phone system leases, etc.
- Engage the right consultant to help select and deploy accounting software, obtain the required journal entries, and make all required entries to your organization’s accounting records.
- Identify potential pain points or additional issues that may unfold along the way. For example, capital and liquidity requirements, debt restructuring, real estate footprints, or LIBOR. By dealing with such issues at the same time as ASC 842, organizations could save significant time and resources.
- Obtain buy-in from key stakeholders. This includes, but is not limited to the Executive Committee and financial statement auditor.
Ready to Tackle This?
Don’t wait – the time is now. Get started on the steps above and you will be there in no time. Especially if you use a Lease Software program. These programs walk you through each step and eventually provide you with all the required journal entries and financial statement disclosures.
If you need further guidance or have any questions — on this or any topic related to labor unions and employee associations — we’re here to help. Please reach out to our trusted advisors to discuss your specific situation.