1. ASU Leases

2. When is it effective?
Non Public Entities must adopt beginning in 2020

3. Don’t Delay Start Planning now
Suggestions for Implementation
Form task force or steering committee; designate individual to champion – engage entire organization
Learn the standard - Financing vs. Operating leases
Compile inventory of leases
Identify potential changes to internal controls
Assess Technology requirements
Discuss with stakeholders
Audit Committee
Lenders etc. May require modifications to covenants
Decide on transition method – including practical expedients
Post adoption considerations

4. ASU 2016-02 All leases now on Balance Sheet Financial Statement
Finance Lease
Operating Lease
Balance Sheet
Recognize an ROU asset and a lease liability, initially measured at the present value of the lease payments. Include initial direct costs in the initial measurement of the ROU asset.
Income Statement
Recognize interest on the lease liability separately from amortization of the ROU asset.
Recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term, generally on a straight-line basis.
Cash Flows
Classify repayments of the principal portion of the lease liability within financing activities and payments of interest on the lease liability and variable lease payments within operating activities.
Classify all cash payments for leases within operating activities.

5. Definition of a lease
Agreement that conveys the right to control the use of an identified asset for a period of time in exchange for consideration;
Right to obtain substantially all the economic benefits from the asset
Right to direct the use of the asset

6. What leases to you have?
Copiers, computers and other small office equipment
Autos
Machinery
Real Estate
Are there leases embedded in service contracts? Maybe

7. Internal Controls How are leases processed/approved today?
How are they tracked/maintained
Manually or electronically?
Centralized or by location/business unit?
How are modifications or amendments handled?
Reporting to lessors?

8. Is Excel Enough? IT Considerations Volume of lease transactions
Operating leases - principal and interest treated differently than prior GAAP
Can fixed assets system handle depreciation?
Disclosure requirements
Is Excel Enough?

9. Communications Have discussion begun with; Audit committee
Lenders – do covenants need to be rewritten?
Lessors
modification to existing agreements
do you need information?
Within Company
Legal, Tax, Financial Planning & Analysis, Treasury, Facilities, Procurement
Employee Training

10. Transition Restate 2019; adjustment to 1/1/2019 Retained Earnings
consistent disclosures
consistent ratios & metrics (EBIT, EBITDA, GP)
Do not restate 2019; adjustment to 1/1/2020 Retained Earnings
duplicate disclosures/systems & methods – need to maintain old GAAP disclosures
inconsistent ratios & metrics
Practical Expedients Package - all or none
Whether an expired or existing contracts are or contain leases
Classification of any expired or existing lease
Indirect Cost for any existing leases

11. The Road Ahead Adoption is the race to the starting line
Solutions need to comprehend post adoption
How to handle
New leases & terminations of existing
Modifications
Disposals / return of equipment
Changes to office space, etc.
Communication among parties