The Three P's of Adopting ASC 842 Lease Accounting Standards
When I turned 40, I decided I wanted to run a marathon. Kind of interesting given I had never run anything more than a mile in my life, and that was over 20 years ago. I was intrigued by the magnitude of the accomplishment and thought I would give it a try – and it changed the way I feel about planning.
With four marathons behind me at this point, and mostly satisfying outcomes, I’m looking forward to my fifth in October. Marathon training is the ultimate in planning.
While the goal is clear, I learned the hard way if you don’t plan all the steps in between, you won’t get to where you want to go. Diet, distance, shoes, speed, weather, time of time – there are so many components to the training – it’s much more than “just running” to achieve your goal. I’ll always reflect back on the initial planning of my first marathon as a critical success factor in my continued interest in running.
In my work life, I see another process that has a similarly significant planning process – the adoption of the new accounting standards. There’s so much complexity and it’s hard to understand where to begin. But like any big goal, proper planning forces you to break it down into meaningful components to achieve the objective.
Now is the time to make sure your plan is built and the process is underway. In doing so, you should consider three key elements:
Pace – How fast can your organization move? This certainly involves assessing the resources that you have to support the process, but also to consider other business priorities, number of departments involved, reliance on outside assistance and potential interaction with colleagues in other countries or that manage non-real estate leases. Do not overestimate how fast you can move – be both practical and realistic without slowing things down for the sake of cautiousness.
Process – What is your approach to meet the objectives? Do you have the staff with the necessary skill-set to accomplish the tasks at hand? Do you need help from outside consultants, abstractors or system vendors? With all the questions you’ll likely encounter throughout the process, who will provide the answers? Are your auditors ready to help? Does your technology support what you need from a data and calculation perspective?
Plan – Have you identified all the tasks and built a project plan? Be sure to separate the activities so they are specific enough to be measurable, but not too detailed that force a full-time job managing minutiae. This project is a multi-year activity and needs to reflect the planning, data gathering, analysis, data modeling and implementation.
While it will not be an easy road, getting the planning process formally underway to understand what needs to be done is the critical first step. Tango is here to help.