2021 Trends: New Lease Accounting Standard and Private Companies
In 2021, CPA firms need to prepare for the implementation of the new lease accounting standard for nonpublic companies by advising clients to engage with banks about debt covenants, centralize lease documents, and identify embedded leases early to facilitate adoption starting late 2021 through 2023.
With 2021 here, CPA firms must begin to prepare for something we’ve known was coming for some time: implementation of the new lease accounting standard for nonpublic companies.
While most clients won't start adopting the new lease standard until late 2021 or into 2022 (or even early 2023), they should talk to their banks early about the structure of their debt covenants and the potential impact of implementation. They should also start tracking their leases and centralizing lease documents, which will be important for implementation. Identifying embedded leases now will also make this process much easier.