New Lease Accounting Standard Has Large Impact on Multinational Corporation

Client: Large Manufacturing Corporation
Requirement: Project Accounting Services

Business Situation:

The client is a multinational corporation comprised of multiple individual operating companies. Financials for US operating companies are reported per US GAAP, and the foreign entities are reported per IFRS. The company’s consolidated financials are per US GAAP.

In order to comply with the new FASB Lease Accounting Standard (ASC842), the client requires recognition of operating leases on the balance sheet. At the initiation of a lease, a “Right of Use Asset”, (equal to the present value of the future lease payments) and an offsetting Lease Liability will be established. The asset and liability will be amortized over the term of the lease and will be recorded as rent expense. Implementation of the new standard must be completed by January 2019.

The client has approximately 1,000+ lease assets worldwide. Vehicles make up the largest portion of these assets, with the remainder in real estate (office space, warehousing, etc.) and equipment.

ProNexus Solution:

ProNexus was engaged by the client to support the implementation of the new accounting standard. Two consultants with lease accounting experience were assigned to lead a three-phase approach to the implementation.

The first phase was the collection of all lease information that would be required to implement the new accounting standard. Concurrently, all lease information was being documented in a standard lease abstract format. The second phase was to compare and analyze the financial information from the abstracts to the general ledger and to the 10K disclosures. This is an ongoing engagement and the third phase will be involving the population and implementation of the new leasing software.

ProNexus is designing and populating Excel templates that will enable the upload of all lease information required by the selected leasing software in order to comply with the new accounting standard. We will also be assisting the client with software implementation, data analysis, financial analysis, and the preparation of the 10K disclosures schedules.

Download our e-guide for more information on how the new leasing standard could effect you: Implementing the New Lease Standard

Post by Kaitlin Alfvin

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