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Case Study
WilliamsMarston Clears the Way for New Lease Standard Adoption
Find out how WM ensured a successful implementation of ASC 842: Leases with a thriving education technology company.
The Challenge
A significant portfolio of leases across parent, as well as foreign and domestic subsidiaries, made implementing the latest lease standard less straightforward.
A large, private education technology organization with various foreign and domestic subsidiaries, needed to adopt ASC 842 as its historical lease arrangements fell under ASC 840. With a portfolio of over 50 known leases to contend with and no central mechanism for tracking lease arrangements and performing lease accounting, the situation was complex.
Deferred rent under ASC 840 was not tracked on a lease-by-lease basis, forcing the need to start from inception on each lease and unwind the accounting to capture the appropriate transition entries. Complicating matters further, the finance department faced limited bandwidth as they navigated the necessary day-to-day responsibilities and could not keep pace with timelines.
The Solution
WM analyzed the existing population of lease contracts and mobilized to centralize and automate accounting schedules, while preparing a new comprehensive policy.
WM began the project by analyzing the company’s existing lease contracts and performed additional embedded lease searches and management questionnaires to help identify and understand the entire population. Once the project was mapped out, the team set up weekly touchpoints to keep deliverables on track, ensuring status updates were regularly communicated to provide visibility into the team’s progress. WM coordinated with the company’s management and its external auditors to reach an agreed upon model and establish materiality parameters under the new standard.
The team then centralized and automated lease accounting schedules, using WM established 842 accounting templates and best practices. This provided the company with a complete baseline deliverable for all future accounting, reporting and disclosure purposes.
WM prepared a comprehensive new lease accounting policy using recently published Big 4 guides as a checklist for impact areas, such as practical expedient elections, lease incentive accounting and modifications. The team also evaluated the extra disclosures required under the new standard and assisted in preparing these disclosures for the company.
The Result
Diligent project planning and output by WM left the company’s lease arrangements in a strong position for future reporting.
WM developed the proposed lease accounting models under the new standard, streamlined and centralized the company’s lease accounting function and created a comprehensive new lease accounting policy. The team also devised an effective work plan to realize – and maintain – the new standard for the lease population going forward. As part of the successful engagement, WM assisted with several components of internal reporting and disclosure, which were impacted by the adoption of the new standard.
THE TEAM RESPONSIBLE
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Michael R. Donoso
Partner – Northeast Region Accounting Advisory Leader
Mike brings 17 years of accounting advisory, consulting and executive management experience to WilliamsMarston. Mike advises a variety of clients in the areas of revenue recognition, debt and equity financings, lease accounting, consolidation, IPO readiness, SEC reporting and other complex technical areas. Mike is also one of the firm’s leaders in the life sciences industry with significant experience with collaboration and license agreements, joint-ventures, financial instruments (i.e., convertible debt and preferred stock), stock-based compensation and initial public offerings. His broad industry experience includes software, technology, manufacturing, telecommunications, consumer products and retail.
Prior to WilliamsMarston, he worked as a Senior Manager in the corporate accounting group of a large public pharmaceutical company, where he evaluated the accounting and reporting for collaboration agreements, business combinations, cost accounting and financial planning and analysis. Prior to working in industry, Mike was a Manager in the Accounting Advisory Services practice of KPMG LLP. While at KPMG LLP, Mike advised Fortune 500 companies on the accounting and reporting for revenue recognition, business combinations, restatements and consolidations. He also frequently spoke on behalf of KPMG LLP to clients and industry groups on the latest developments at the FASB and SEC, including the impacts of new accounting standards on organizations in various industries.
Mike is a Certified Public Accountant in both New York and New Jersey and holds a Bachelor of Science in Business Administration with a dual degree in Accounting and Finance, and a Master of Accountancy from West Virginia University.
Joseph Ballway
Managing Director – Accounting Advisory
Joe brings 11 years of accounting and financial reporting experience to WilliamsMarston. Since joining WilliamsMarston, Joe has advised clients on initial public offerings, mergers and acquisitions, the implementation of the new revenue and lease standards and various other complex technical accounting matters including those pertaining to collaborative arrangements, consolidations, debt, preferred stock, stock-based compensation and SEC reporting. Joe has also provided interim management and assisted clients with audit preparedness and the implementation of internal controls, policies and procedures.
Prior to WilliamsMarston, Joe was in the Audit practice of PricewaterhouseCoopers LLP in Boston for four years. While at PwC, Joe led the fieldwork for one of the firm’s largest and highest-profile clients, overseeing the engagement team and all audit areas including the review of the financial statements. Joe’s industry experience includes biotechnology, software-as-a-service, medical device and financial services, amongst others.
Joe holds a Bachelor of Arts in English from the College of the Holy Cross and a Master of Science in Accounting and Business Administration from Northeastern University.
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