ASC 842 two years in: lessons learned

When ASC 842 took full effect for private companies, most accounting teams treated it as a one-time implementation project. Identify the leases. Build the schedules. Produce the opening balance adjustments. Move on.

Two years later, the reality has set in: lease accounting under ASC 842 is not a project. It is an ongoing operational process that touches every close cycle, every audit, and every lease decision the organization makes.

The teams that have thrived share common traits. They invested in sustainable processes early, built internal expertise, and chose tools that could evolve with their needs. The teams still struggling often made the same avoidable mistakes.

The spreadsheet trap

The most common regret we hear from controllers is starting with spreadsheets. It made sense at the time. The portfolio was manageable, the deadline was approaching, and building a model in Excel felt faster than evaluating software.

For organizations with fewer than 50 leases, spreadsheets can work in the short term. The problem emerges with modifications.

Every rent escalation, term extension, or early termination requires recalculating the entire remaining schedule. ASC 842 requires remeasuring the lease liability at the modified discount rate - a single modification can take hours to process correctly in a spreadsheet. Multiply that by dozens of modifications per quarter, and the spreadsheet that was supposed to save time becomes the team's biggest bottleneck.

Organizations that started with spreadsheets and later migrated to dedicated platforms report that the migration took effort, but the ongoing time savings justified the switch within two to three close cycles.

Embedded leases are still catching teams off guard

During initial adoption, most organizations focused on the obvious leases: real estate, vehicles, major equipment. Embedded leases - those buried within service agreements, supply contracts, and outsourcing arrangements - were often identified superficially or missed entirely.

Two years in, auditors are scrutinizing embedded lease populations more closely. Common areas where they surface:

• Managed IT services with dedicated server or data center space
• Logistics contracts with dedicated fleet vehicles or warehouse sections
• Manufacturing agreements with dedicated production lines or equipment
• Outsourced facilities management with dedicated office space

The lesson: lease identification is not a one-time exercise. Organizations need a repeatable process for evaluating new contracts and existing renewals for embedded components - documented well enough to satisfy auditors who will ask about it.

What to do about it now

If your team is experiencing any of these pain points, the path forward starts with an honest assessment.

Document where time is being spent. Track the hours your team puts into each close cycle, broken down by task. Schedule calculations. Journal entry prep. Reconciliation. Disclosure assembly. This data reveals which steps are candidates for automation and which need process redesign.

Catalog where errors are occurring. Review audit findings, restatements, and internal corrections from the past four quarters. Patterns in errors point to systemic issues, not individual mistakes.

Evaluate whether you need better tools, better processes, or both. In most cases, it is both. A modern platform eliminates the mechanical work, but it will not fix a broken process around lease identification, modification tracking, or data governance.

The organizations thriving under ASC 842 did not get there by doing the same work faster. They redesigned how the work gets done. Two years in is not too late to make that shift - but every close cycle spent in the old process is a cycle of compounding inefficiency.