In February 2016, the FASB issued a revised leasing standard under ASC 842 in their Accounting Standards Update 2016-02. ASC 842 will take effect in 2019, so now is the time for institutions to prepare for the change.
Since leasing is not lending, institutions must have a thorough understanding of the revised accounting requirements for lessors as well as the risks related to ASC 842 compliance including:
- Regulatory accounting compliance risk: Institutions must prepare to comply with GAAP under ASC 842 for financial reporting purposes as well as for regulatory reporting. Compliance with the revised leasing standard will go into effect for periods beginning on or after Dec. 15, 2018, but early adoption is also available.
- Third party controls risks: Leasing can be an important profit opportunity for all institutions including community banks who may choose to work with an outside service provider or even partner with a leasing company. In these situations, it’s important to comply with regulatory requirements to maintain proper accounting and related internal controls over third party relationships. That means someone in your institution must be conversant in lease accounting requirements in ASC 842.
- Leasing default risks: The new ASC 842 leasing standard will require the institution’s customers to list the cost of operating leases as liabilities on their balance sheet. These companies currently report operating leases in their financial statement footnotes. However, reporting leases on the balance sheet will require these lessees to implement internal due diligence and controls to manage all their leasing activity. The risk is that unless there is central management of all leases, the company’s balance sheet may not accurately reflect the new lease liability according to ASC 842. Underreporting liabilities could adversely affect the lessee’s financial performance and potentially lead to lease default risk.
Institutions also have to understand the impact of ASC 842 on bank-owned real estate including arranging for sale-leaseback transactions as well as branch closures of leased premises.
Please join Gary Deutsch, CPA MBA, as he addresses these risk issues and discusses how to comply with the FASB’s new lease accounting requirements.
WHAT YOU’LL LEARN
What this webinar will cover:
- Understanding what is changing between the current accounting standards in ASC 840 compared with the new lease accounting requirements in ASC 842.
- Considerations for early adoption of ASC 842.
- Understanding when a lease will be considered a sales-type lease, direct financing lease, or an operating lease.
- Methods for recording operating leases.
- Evaluating the impact of the new leasing standard on your lessees’ financial statements.
- How to record the proper accounting entries including performing calculations such as the net investment in a lease and the estimated residual value.
- Methods for determining impairment for direct financing lease receivables.
- Methods for recording lease transactions involving bank-owned real estate including sale-leaseback transactions and the cost of exiting a lease.
- AND MUCH MORE!
YOUR CONFERENCE LEADER
Your conference leader for “Complying with New Lease Accounting Requirements Under FASB’s ASC 842” is Gary Deutsch, president, BRT Publications LLC. Mr. Deutsch is a licensed CPA in Maryland and has a B.A. in accounting and an MBA in finance from Loyola University Maryland. He has also achieved the Certified Management Accountant, Certified Internal Auditor and Certified Bank Auditor designations. Mr. Deutsch is the founder and president of BRT Publications LLC. Mr. Deutsch has trained thousands of financial institution professionals in all aspects of risk management and has written numerous books in the U.S. and Europe on topics such as credit risk, internal audit and compliance with Generally Accepted Accounting Principles. Mr. Deutsch has extensive risk management and internal audit experience through his association with financial institutions of all sizes as well as through his role leading the KPMG financial institution consulting practice in the Mid-Atlantic region.
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