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Lease Accounting (ASC 842 and GASB 87)

Are you ready to implement ASC 842 or GASB 87, one of the new lease accounting standards? With new practical expedients, organizations should re-evaluate their implementation plan. No plan in place? Our lease accounting specialists can help.

Lease Accounting (ASC 842 and GASB 87)

  1. Jodi L. Dobson

    Jodi Dobson



  2. Paul Dunn

    Paul Dunn



  3. Anthony Leung

    Anthony Leung



  4. James A. Smolinski

    James Smolinski



  5. Jeff Weinberg

    Jeff Weinberg



  6. Dan Martin

    Dan Martin



What are the lease standard changes?

Accounting Standards Update (ASU) No. 2016-02, Leases (ASC 842) and GASB Statement No. 87 (GASB 87), change the financial reporting requirements of organizations that enter into leasing transactions or other contracts for assets such as real estate, vehicles and equipment. They will significantly affect organizations having arrangements that need to be accounted for under either of the new standards.

  • All lease arrangements and amendments will need to be identified, inventoried and reviewed by accounting to identify the changes necessary to comply with the new standard.
  • Other contractual arrangements, such as supplier arrangements and service contracts, can contain embedded lease arrangements that will also need to be identified and reviewed.
  • Identifying and understanding all lease arrangements will be a cross-functional effort.
  • Implementation could require new or revised lease administration software applications, policies, procedures and controls, both for accounting and operations.
  • Financial reporting changes could potentially impact debt covenants, key performance indicators (KPIs), cost of capital decisions and other strategic planning efforts.
  • Additional financial statement disclosures will be needed.
  • Internal training, policies and procedures and new internal controls regarding application of the standard will need to be implemented.
  • Significant judgments, estimates and periodic revision of estimates will be required, including testing for the potential impairment of right-of-use assets. (ASC 842)
  • Documenting the judgments required to implement the standard (including practical expedients and accounting policy elections) is critical for audit preparedness. (ASC 842)
  • Financial statements will be impacted with the lease-related assets, receivables, liabilities and deferred inflows of resources coming on to the statement of net position. (GASB 87)

Effective dates of new lease accounting standards

ASC 842

  • Public business entities: already effective for public business entities (fiscal years beginning after Dec. 15, 2018)
  • Nonpublic business entities: fiscal years beginning after Dec. 15, 2021*

*In June 2020, the Financial Accounting Standards Board (FASB) issued ASU 2020-05, which provided an additional one-year delay in the effective date for nonpublic business entities.

Early adoption is permitted for all entities as of Feb. 25, 2016 (issuance date of final standard).


  • Effective date: fiscal years beginning after June 15, 2021 (i.e., fiscal years ending June 30, 2022 and later)
calendar with hourglass

The clock is ticking for private companies and NFPs!  

FASB decides no delay in leases standard: On Nov. 10, the Financial Accounting Standards Board (FASB) voted against deferring the lease accounting standard for a third time for private companies and not-for-profit organizations, making the requirements imminent. The standard is set to take effect for nonpublic entities for fiscal years beginning after Dec. 15, 2021, and interim periods within fiscal years starting after Dec. 15, 2022.

What to do now

Talk to your stakeholders

It’s important to connect with the people that need to be involved throughout the process and get their input on the effort they think your organization will need to expend.

Consult your Baker Tilly advisors

Talk with your advisors and begin to understand the process and how your organization can successfully implement accounting and systems changes for long-term success with leases accounting.

Complete the ASC 842 readiness evaluation

Our lease accounting specialists have developed an evaluation tool made up of a simple, straightforward set of questions that will help us understand important information specific to your lease portfolio and environment. We can then assist you in implementing the ASC 842 lease accounting standards to confirm you are right on track.

Our understanding of your organization’s specific needs for lease implementation in compliance with ASC 842 or GASB 87 allows us to assist lessors and lessees with the required changes. Begin the process now to determine how much of an impact the lease standard requirements will have on your financial statements, debt covenants, processes, documentation and controls.

    How Baker Tilly can help you in the adoption of ASC 842 or GASB 87

    Project oversight

    • Project management
    • Implementation plan
    • Employee training
    • Policies and procedures

    Adoption impact

    • Lease identification and inventory
    • Lease portfolio analysis
    • Embedded lease analysis
    • Readiness risk assessment

    Lease administration software

    • Lease software evaluation and selection
    • Lease software implementation

    Financial reporting

    • Incremental Borrowing Rate (IBR) determination support
    • Lease abstraction
    • Transition and post-adoption journal entries
    • Footnote disclosures


    • Financial statement impact assessment
    • Outsourced lease administration
    • Lease structuring advisory

    Baker Tilly’s lease accounting implementation process

    Baker Tilly has developed a four-step methodology, tailored to your organization’s needs, to help you through the complex process of assessing impact, developing a plan and implementing that plan across your organization.

    Implementation process for helping create plan for organization

    Steps 1 and 2

    Step 1: Create task force and implementation plan

    • Establish/define resources to take the lead on understanding and implementing the new lease standard. Input will be needed from finance, accounting, tax, real estate, legal and technology.
    • Create Task Force to oversee implementation process.
    • Establish a plan and timeline for project implementation.
    • Evaluate lease administration software options and determine how software can assist in managing the lease portfolio after transition to ASC 842 or GASB 87.

    Step 2: Identify all leases, transition method and IBR

    • Engage and train appropriate team members who will be compiling lease documents and performing lease abstracts.
    • Ensure all leases have been identified.
    • Confirm current lease documents and all amendments are on file.
    • Decide on transition method (with or without Package of Practical Expedients as applicable).
    • Gather data and prepare documentation to support the company’s determination of its IBR.

    Steps 3 and 4

    Step 3: Lease evaluation, data extraction and review

    • Abstract lease data using a standard process.
    • Evaluate key lease elements impacted by ASC 842 or GASB 87: lease and nonlease components (gross vs. net leases), lease terms and renewal options.
    • Load lease data into lease software, including data such as lease clauses appropriate for continuing lease portfolio management.
    • Review lease data to ensure it is correct, consistent and complete.
    • If lease software entries will be uploaded to an accounting system, confirm lease software data feed is mapped correctly to the G/L account codes.

    Step 4: Implementation

    • Confirm transition method, judgments and use of practical expedients and accounting policy elections.
    • Perform lease analysis  and create required journal entries.
    • Verify lease entries and/or data feed are properly recorded in the financial records.
    • Revise footnote disclosures as appropriate.
    • Develop internal policies and procedures to address new leases, lease terminations, lease modifications and potential future impairment.
    • Communicate updates to relevant stakeholders.

    Baker Tilly has experience working with three software providers

    Baker Tilly works with three software providers

    Visual Lease | Lease Accelerator | LeaseQuery