In recent years, your company has leased property and equipment and relied on the ASC 840 accounting software to keep record. Undoubtedly, this software had numerous issues because it was developed and implemented over forty years ago (right about the time that computers became office hardware for the first time ever). That is precisely why ASC 842 software was developed and precisely why it is now universally being implemented as the only acceptable accounting software for all business leasing.

The software and its related regulations went into effect as of December 2018. Its full implementation nationwide has to be completed by December of 2019. If you have been assigned to head up this project implementation as the ASC 842 implementation project manager, here are some expected complications and what you can do about them. 

Transitioning Current Records Over to the New Software

Any time business records have to be moved over to a new software program, some things can be lost in transit. This happens every time medical records have to be digitally transferred over to new patient billing and accounting software. Likewise, with the ASC 842 software, you should expect this kind of glitch. You can prepare for it by making a copy of each record or file of a business lease, transferring the original file over, checking it against your copy, and if everything looks right, deleting the old file and the copy. If the full file did not transfer over, and/or you lose the original file completely or it is deleted by accident, you still have the copy on which to fall back. 

Impacts on Debt Covenants

Debt covenants are agreements to provide this for that with another company or lender. Under the old leasing and bargaining software, these covenants are fairly straightforward and may have very little to do with business leasing and accounting. However, previously made debt covenants under the new software (i.e. ASC 842) are going to hit a few speed bumps.

Some debt covenants may even face dissolution, a major problem for any longstanding covenant your company made with any lender or other company for money, goods, or services. Your company may encounter minor or major violations of preexisting covenants when you have to set these into the constructs of assets and liabilities. The best thing to do is to arrange to rewrite these covenants so that they can be accounted for in the new ASC 842 software.

Learn more from a company such as Horizon Projects Consulting.