Transitions are rarely simple, especially when they involve financial compliance. This is particularly true with ASC 842. To help private and non-public enterprises navigate the shift, we’ve compiled a comprehensive guide. ASC 842 lease accounting is designed to bring clarity and structure to how leases are reported under US GAAP, but the path to compliance requires careful planning.

Is your organization ready for the transition?

It may seem like all you need is a checklist to guide the process. But that’s a risky oversimplification. Transitions like this often involve unexpected obstacles that aren’t covered by a checklist.

Experts who have managed similar projects recommend starting with your internal records. Begin gathering details about all currently active leases. Accurate and thorough lease data will serve as the foundation for every next step.

You’ll need to identify master leases, assign inventory, review capital allocations, and ensure all relevant data points are prepared and verified. This is a key part of laying a solid foundation for compliance.

Managing people and processes

Two of the most critical elements during a transition like this are managing your people and your processes. While it sounds simple, doing it right is anything but easy.

How to manage people during an ASC 842 transition

When preparing for ASC 842 lease accounting, team members typically fall into three categories:

1. Decision-makers and transition managers
   These individuals are responsible for defining the strategy and seeing the bigger picture. They coordinate efforts and guide the entire transition.

2. Operational team members
   These employees, often from leasing or finance departments, are deeply involved in the process but are not making strategic decisions. They need to be trained and kept informed of all changes and tools.

3. Support staff and cross-functional teams
   People from IT, legal, and other departments may be involved intermittently. Their input is important in areas like contract review and data integration, but their involvement is usually more task-specific.

How to manage processes during the ASC 842 transition

Process management includes creating timelines, assigning tasks, and monitoring progress. The most effective transitions are supported by the right software solution from the beginning.

A good lease accounting tool will allow you to:

• Assign tasks to specific users or departments

• Monitor progress through dashboards

• Share files and updates in real-time

• Maintain a centralized data source for everyone involved

Delegation is key. Having a clear structure for who handles IT tasks, legal documents, lease inventory, and system integration can help avoid confusion and delays.

Overseeing your lease portfolio during the transition

Choosing the right software isn’t just about long-term efficiency - it will directly influence the success of your transition. Businesses should aim to select and implement software several months before the official compliance deadline.

The right solution will help by:

• Reducing time spent on repetitive tasks

• Automating lease classification, calculation, and reporting

• Simplifying audits and reconciliations

• Centralizing data for lease agreements and financial forecasts

• Improving analysis for better business decisions

SOFT4Lessee, for example, supports compliance from day one. Lease capitalization thresholds and other relevant figures can be preloaded into the system to ensure accuracy from the start.

Real-time validation and adjustments

Lease accounting is all about long-term commitments. Companies with a portfolio of ASC 842 finance leases need forward-looking insights, typically 3 to 5 years ahead, for planning, reporting, and forecasting.

As the transition progresses, your team will create lease inventory listings and commitment schedules. These should be aligned to validate projections and ensure consistency.

Here’s one useful approach: review recurring payments and cross-check them with your lease agreements. This ensures that your lease portfolio is complete and up to date. You can also compare rent expenses recorded in your general ledger with projected rent expenses. If numbers don’t align, there may be duplicate entries or missing contracts. Catching these discrepancies early helps reduce errors and avoid compliance risks.

Final thoughts

Transitioning to ASC 842 requires more than a checklist. It demands a clear plan, proper delegation, cross-department collaboration, and the right tools.

By cleaning up your lease data, removing duplicate invoices, and automating error-prone processes, your organization can reduce IT and operational costs. At the same time, you'll strengthen internal controls and streamline reporting.

Software like SOFT4Lessee helps make this entire process more efficient, more reliable, and easier to manage from start to finish.