Most lease software are not strong in lease accounting. They were derived from prior lease management softwares. They often lack understanding of complex lease accounting issues, ignorant of public disclosure requirements, let alone transition from former accounting standard to a new accounting standard.
UGAAP lease accounting software's powerful and flexible lease reassessment/modification functionality plays a critical role in lease standard transition. This is best explained in an example. Let’s say a company adopts ASC 842 on 1/1/2019 (adoption date) and elects to use the earliest comparative period method. Its earliest comparative period presented in the financial statements is the period beginning 1/1/2017 (transition date). Software users just need to follow the following steps:
First, input lease agreement information in the UGAAP system.
Nothing needs to be done for leases that expired before 1/1/2017.
For existing leases entered into before 1/1/2017, enter 1/1/2017 as modification/reassessment date, update discount rate and initial foreign exchange rate to the rates as of 1/1/2017, input the probable payment amount of residual value guarantee, if any, and other un-amortized lease general ledger balances as of 1/1/2017: prepaid rent, lease incentives, initial direct costs, favorable/unfavorable leasehold intangibles, etc. UGAAP software will test lease classification, calculate lease liability and right-of-use assets as of 1/1/2017, generate amortization table, and properly report all balances, costs and disclosure items after 1/1/2017, including 12/31/2018, the comparative balance sheet date. On 1/1/2019, all balance sheet lease accounts in general ledger under the old accounting standard should be updated to the 12/31/2018 balances in the UGAAP system, with any difference recorded as the adjustment to retained earnings as of 1/1/2019.
For existing leases entered into on/after 1/1/2017, same procedure as above, except for replacing 1/1/2017 with the lease commencement dates.
For new leases entered into on/after 1/1/2019, no modification/reassessment needs to be performed. UGAAP provides ongoing accounting tables, journal entries, reports and disclosures for financial reporting and management reporting purpose.
The above process can apply to companies with any adoption dates and transition dates. If the FASB Exposure Draft 2018-200 becomes final standard, the companies who elected the practical expedient will have the same adoption date and transition date. The UGAAP system is flexible and powerful to always arrive at the most appropriate accounting treatment and disclosure deliverable.
UGAAP provides a no-question-asked free demo available for download at www.ugaapinc.com. It is in MS Access 2016 format. It has been thoroughly tested by CPA professionals. We can't wait to see what you do with it.