If you’re managing multiple locations, ASC 842—the new lease accounting standard—might already feel like a big deal. This rule, designed to make financial reporting clearer and more comparable, means that leases longer than 12 months will now have to show up on your balance sheet. While this can feel like a lot to navigate, it’s important to understand how it affects your operations and what you can do to stay compliant, all while keeping your lease management efficient.
Key Changes with ASC 842:
Leases on the Balance Sheet: Whether you’re dealing with a finance lease or an operating lease, they both need to be recorded as right-of-use (ROU) assets and liabilities. This will change how your financial statements look.
More Transparency: The goal of ASC 842 is to give stakeholders—like lenders and investors—a better understanding of your lease obligations. It brings more visibility to your long-term commitments, which might feel like added pressure but also opens doors for more trust and accuracy in your financials.
Greater Complexity: Multi-location operators juggle all kinds of leases—whether for property, equipment, or technology. Under ASC 842, tracking lease details, like terms, renewals, and variable payments, gets more complex, so staying organized is key.
Why This Matters to Your Business:
Shifting Financial Ratios: Putting leases on the balance sheet can alter important metrics like debt-to-equity and return on assets. This could have implications for loan agreements or even how investors view your company.
Improving Operational Efficiency: The more leases you manage, the more important it is to streamline your processes. Leveraging technology to centralize and automate lease data is going to save you time and make your reporting more accurate.
Reevaluating Lease Strategies: ASC 842 might push you to rethink your approach to leases. With a clearer view of your obligations, it might make sense to reassess lease vs. buy decisions across your locations to make more strategic choices.
How Property Works Can Support You:
Don’t worry—navigating ASC 842 doesn’t have to be a headache. At Property Works, we understand the complexities multi-location operators face, and we’re here to help. We’ll keep your lease data accurate and compliant, so you can focus on running and growing your business without the added stress.
