How Many Leases Need To Be Read in 2020?
As we’ve outlined previously, at least 4 million and upwards of 10 million leases will need to be read & reviewed by accounting teams in 2020.
We are assuming, of course, that this is the first time they’ll be adopting the new ASC 842 accounting standard.
Why Is It So Hard To Read A Lease in 2020?
Well, it depends what you are looking for. It’s easy to find 3 data points: a start date, an end date and a payment amount. These were the requirements under ASC 840, the old accounting standard.
Under ASC 842 (and GASB 87 and IFRS16) you will need to collect those data points, along with options, escalations, CPI, incentives, allowances, improvements and other risk factors. These are real estate or equipment leases that lawyers or facilities experts may be familiar with, but not necessarily the accounting team.
It can take 30 minutes or up to 3 hours to properly review and extract a lease for accurate compliance.