Our Take: How NetSuite Supports ASC 842 Accounting Changes
Judy Wright, Vice President of Finance, BTM Global
The new lease accounting standard, ASC 842, is a big change for public and private companies in the U.S.
The rule was created to standardize how companies represent capital and operational leases, and to get American organizations aligned with how the rest of the world represents leases.
What is ASC 842?
ASC 842 is now in place and is required of all U.S. companies, with rare exceptions. To get a really helpful overview of why ASC 842 was enacted and the changes it requires, watch this NetSuite video.
Managing ASC 842 compliance
The requirements of ASC 842 will be a big impact to your balance sheet and will require more accounting attention. There’s no getting around that.
Organizations will want to operationalize this work by putting the lease schedules into NetSuite so adjustments can be made automatically at closure of the books.
Without a financial system like NetSuite, you’ll likely have to pay individuals to manually handle ASC 842 requirements, including accountants, bookkeepers, auditors, etc.
Using NetSuite to Comply with ASC 842..and Future Changes
Once set up correctly in NetSuite, the system will be able to automate much of the lease work…
- Within fixed asset capabilities, NetSuite will record depreciation and decrease the lease liability based on the payment schedule and record interest expenses as well.
- NetSuite will help ensure the interest will appropriately decrease liability as the schedule moves out.
ASC 842 is just the first of many regulatory changes expected in the next few years. If you don’t already have NetSuite, implementing it now will have a quick ROI for this accounting change and future requirements.
BTM Global’s Experience Complying with ASC 842
Here at BTM, we’re currently working through ASC 842 compliance. NetSuite has been a huge help with reducing the workload and automating tasks, but the set-up does take time because of the complex nature of the requirements.
NetSuite will be essential for making compliance go more smoothly. We know many companies use journal entries, which may work fine if you have very few leases. But larger companies or those with many leases will find a lot of value from the module’s automation.
We are still finalizing our compliance, so we’ll have more best practices and recommendations to share with you once we are completed!
In the meantime, if you have questions about complying with ASC 842 and using NetSuite, or you want to make the switch to NetSuite, contact us and we can help.