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From Modifications to Abandonments: A Deep Dive into ASC 842’s Most Complex Scenarios

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Adopting ASC 842 has completely updated lease accounting, presenting CPAs with a brand new set of guidelines for accounting for the various changes made to a lease agreement over its term. In a recent webinar, Jaron Moss, a CPA and technical accounting consultant at FinQuery, and former auditor, delved into the intricacies of applying ASC 842 to various lease scenarios, highlighting the challenges CPAs face in ensuring accurate financial reporting and compliance.

This article explores how the new lease accounting standards impact the day-to-day work of accountants, some of the complex scenarios encountered, and the skills and knowledge needed to navigate these complexities effectively.

Lease Modifications and Reassessments: Adapting to Changes

Lease modifications and reassessments are common scenarios that require CPAs to apply their understanding of ASC 842 to ensure accurate financial reporting. As Jaron Moss explains, “A modification is a change in the terms and conditions of a contract that results in a change in the scope or consideration of a lease. Essentially, you go to the lessor, renegotiate the contract, and you get a new contract. That’s a modification or amendment.”

Modifications involve changes in lease terms, while reassessments occur when the lessee’s facts and assumptions change without renegotiating with the lessor. Accounting for modifications and reassessments differs in terms of:

  • Reallocating consideration
  • Reassessing lease classification
  • Updating discount rates

Navigating lease modifications and reassessments requires a deep understanding of ASC 842 and the ability to adapt to changes in lease contracts.

Partial Lease Terminations: Two Approaches to Consider

Partial lease terminations present another complex scenario CPAs must handle in accordance with ASC 842. These occur when a lessee reduces the leased assets to a lesser amount. Accountants must be aware of two approaches for accounting for partial terminations:

  1. Adjusting the right-of-use asset (ROU asset) proportionate to the change in the lease liability
  2. Adjusting the ROU asset proportionate to the change in the asset itself

Calculating adjustments to the lease liability and ROU asset, and a gain or loss on the partial termination requires a thorough understanding of the different approaches to ensure accurate accounting.

Lease Impairments and Abandonments: Identifying and Accounting for Complexities

Lease impairments and abandonments are complex scenarios that require CPAs to apply judgment and knowledge of ASC 842 and related guidance. “When a lease impairment is recognized, the carrying amount of the lease is adjusted downward to its recoverable amount, which is the higher of the fair value less the cost of disposal or its present value of future cash flows,” explains Jaron Moss.

Lease impairments occur when the recoverable amount of a leased asset falls below its carrying amount. Lease abandonments occur when the lessee stops using a leased asset before the lease term expires without the lessor’s consent. Accountants must be able to identify and account for lease impairments and abandonments appropriately. Leveraging technology allows CPAs to handle complex calculations more efficiently and focus on providing value-added insights.

As Jaron Moss states, “Keep in mind, using a tool is one of the best ways to handle these types of complex lease changes, so you don’t have to spend your time on these tedious, complex calculations. You can focus on the areas that add more value to your organization.” 

Those looking for a tool to assist with the complexities of lease accounting and compliance should consider the solutions offered by FinQuery.

Embracing the Future of Lease Accounting

The adoption of ASC 842 has significantly impacted the accounting profession, requiring CPAs to stay up-to-date with the latest guidance and best practices. Accountants who can effectively navigate lease accounting complexities will be better positioned to serve their clients and organizations in the post-ASC 842 landscape.

To gain a deeper understanding of the complexities of lease accounting under ASC 842 and learn how to navigate these challenges effectively, watch the webinar recording.

The Power of Strategic Marketing: Transforming Your Accounting Firm into an Industry Leader

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How can your firm stand out and thrive in a crowded market where countless accounting firms vie for clients’ attention? The answer lies in strategic, targeted marketing. In this insightful webinar, Whitney Hesmer, co-founder of Markology, shares her expertise on the importance of focused marketing approaches for accounting firms. By investing in targeted strategies such as SEO, content marketing, and leveraging communities, accounting firms can differentiate themselves from competitors, build trust with potential clients, and establish themselves as authorities in their chosen niche.

Finding Your Niche

One of the most crucial aspects of targeted marketing is identifying and focusing on a specific niche. As Hesmer emphasizes, “From a marketing point of view, when we talk about niche, what we’re really talking about is narrowing down your audience. So not taking a scattergun approach to marketing.” Concentrating on a particular industry, location, or specialty lets you differentiate your firm from competitors and tailor your marketing messages to resonate with your target audience.

Narrowing your focus allows you to allocate your marketing resources more effectively and establish your firm as an authority in your chosen field. Instead of trying to compete with larger, generalist firms, you can carve out a unique space where your expertise shines. This targeted approach not only helps you attract the right clients but also enables you to provide specialized services that command higher fees.

Investing in SEO and Content Marketing

Investing in search engine optimization (SEO) and content marketing is essential to attract and nurture leads in your niche. As Hesmer points out, “Content marketing is anything from blogs to videos to guides. It’s building yourself as an authority in the space to speak on your topics of expertise.” By consistently creating valuable content tailored to your target audience, you can build trust with potential clients and position your firm as a thought leader.

SEO goes hand in hand with content marketing, ensuring that your website and content rank high in search engine results for keywords relevant to your niche. By optimizing your online presence, you can attract organic traffic from potential clients actively seeking the services you offer. Investing in these strategies ensures that your ideal potential clients will find you at the right time rather than you having to seek them out actively.

Leveraging Communities and Video Marketing

In addition to SEO and content marketing, Hesmer highlights the power of leveraging communities and embracing video marketing to expand your firm’s reach: “Webinars, podcasts, leveraging other communities. This is a great way to capitalize on other people’s audiences, leverage each other’s audiences, and share in the resource building.” Collaborating with complementary businesses and thought leaders in your niche allows you to tap into new audiences and showcase your expertise to a broader group of potential clients.

Video marketing, in particular, has become increasingly important in today’s digital landscape. By creating engaging video content, such as webinars, tutorials, or thought leadership pieces, you can connect with your audience more personally and demonstrate your knowledge and skills dynamically and visually appealingly. Video content is also highly shareable, spreading your message organically through social media and other online channels.

Navigating the Evolving Marketing Landscape

As the marketing landscape continues to evolve, with changes in Google search algorithms and the rise of artificial intelligence, accounting firms must stay adaptable and informed. While these changes may seem daunting, they also present opportunities for firms that embrace targeted, innovative marketing strategies. By staying attuned to industry trends and continually refining your approach, you can position your firm for long-term success in an ever-changing market.

In today’s competitive landscape, strategic, targeted marketing is no longer a luxury but necessary for accounting firms looking to thrive. By identifying and focusing on a specific niche, investing in SEO and content marketing, and leveraging communities and video marketing, your firm can differentiate itself, build trust with potential clients, and establish itself as an authority in your chosen field. 
To learn more about how your accounting firm can harness the power of strategic, targeted marketing, watch the full webinar and discover the insights that can transform your business. With the right approach and a commitment to continuous improvement, your firm can unlock the power of targeted marketing and achieve lasting success.