Lease Accounting Changes Are Coming: Have You Thought of Everything?

December 13, 2019 | 2020 here we come David Weber, Principal, CLA,

The way your company accounts for leases will change considerably when Accounting Standards Codification 842 goes into effect on Jan. 21, 2021, for most private companies. If you haven’t yet considered the technical accounting challenges, impact to existing business processes and resources needed to implement the new standard, here are some things to think about.

Accounting and disclosure requirements

The new standard generally brings all leases onto the balance sheet. It’s important to understand that the definition of a lease has changed, so many contracts historically not considered leases may now fall under that category. Financial statement disclosure requirements have been significantly enhanced so users can assess the amount, timing and uncertainty of cash flows arising from leases. You may need more accounting resources to meet these new reporting requirements.

Data collection and management

Collecting and assessing data may be resource-intensive, depending on the systems used to track and monitor leases. Information not necessarily contained in lease agreements may now be required to evaluate the new standard’s impact. Data collection might be better performed with outside support using technology tools to automate the process.


Look at your existing processes and controls for entering into and monitoring leases. Because most leases will be on the balance sheet, the way you analyze the benefits of buying versus leasing may be affected. Debt covenant compliance may be impacted as well. Talk with lenders to determine if modifications to existing debt arrangements are warranted.

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting, investment, or tax advice or opinion provided by CliftonLarsonAllen LLP (CliftonLarsonAllen) to the reader. For more information, visit