What construction companies need to know about the new lease standard: five key takeaways

While the new lease standard, ASC 842, is already making a major impact on construction companies, many construction leaders still do not understand the key concepts of the standard, not to mention the complexities of the process or where to find professional assistance with their implementation.

With this in mind, we recently led a comprehensive webinar that provided an overview of ASC 842 as it applies to construction companies. We highlighted the important concepts and challenges, outlined the implementation process and detailed how Baker Tilly can assist construction companies with their ASC 842 needs.

Below are five key takeaways from that webinar, “What construction companies need to know about the new lease standard,” which you can view here.

1. Not prepared? You’re not alone

Our first takeaway comes from two of the polling questions from the webinar. The first asked simply whether the participants’ construction companies have started ASC 842 adoption. The results were basically a 50/50 split between the nearly 200 respondents.

Later in the presentation, we asked the viewers what their construction companies’ level of preparedness was for ASC 842. There were three options: Very prepared, somewhat prepared and unprepared. And among all the participants, 79.5% categorized their companies as somewhat prepared or unprepared. Just 1 in 5 felt chose “very prepared.”

These results aligned with our expectations based on many discussions with clients and other construction professionals – that many companies have not even begun the process, and that the level of preparedness across the industry is not where it needs to be.

2. Changes in disclosures

One of the areas of ASC 842 that often gets overlooked is the disclosures. With ASC 840, the required financial statement disclosures generally were just the five-year commitment stable showing your future minimum lease payments. With ASC 842, that is no longer the case. In this standard, disclosure requirements have been greatly enhanced – both quantitively and qualitatively.