The Benefits of ASC 842 and Cloud Computing: How They Can Streamline Your Business Operations

The Benefits of ASC 842 and Cloud Computing: How They Can Streamline Your Business Operations

As technology continues to evolve, businesses need to keep up with innovative solutions to enhance their operational efficiency, minimize costs, and maximize profitability. One of the significant advancements in this regard is the combination of ASC 842 compliance and cloud computing. In this article, we will discuss how these two solutions can streamline business operations and bring about a range of benefits.

Introduction

Over the years, the Financial Accounting Standards Board (FASB) has been trying to improve the lease accounting process for companies. In 2016, they issued a new lease standard ASC 842, that requires all leases to be reported on an entity’s balance sheet. This new standard offers innumerable benefits over the earlier ASC 840, and when combined with cloud computing, can enhance business operations significantly.

The Advantages of ASC 842

ASC 842 is designed to make lease accounting more transparent, leading to better financial reporting and decision-making. Here are some of the benefits it brings:

1. Enhanced Financial Reporting: ASC 842 ensures that lease accounting standards are consistent for both lessees and lessors. This makes financial reporting more accurate and helps stakeholders better understand the business’s financial health.

2. Improved Flexibility: ASC 842 allows businesses to choose between two accounting methods – operating leases or finance leases. This flexibility enables companies to structure lease agreements that are best suited to their particular circumstances.

3. Streamlined Lease Administration: With ASC 842, businesses can automate their lease accounting process using specialized software. This automation eliminates the need for manual data entry, reduces errors, and minimizes the time and effort needed for the lease administration process.

The Benefits of Cloud Computing

When combined with cloud computing, ASC 842 becomes even more beneficial. Here’s how:

1. Cost-Effective: Cloud computing eliminates the need for on-site servers and hardware, which creates savings on capital expenditures. Additionally, businesses can pay for the software as a service (SaaS) model, which eliminates the need for costly upgrades in the future.

2. Accessibility: Businesses can access the software and its data from anywhere in the world, allowing employees to work remotely and access the system at any time.

3. Scalability: Cloud computing allows businesses to scale the software up or down, depending on their requirements without additional infrastructure costs.

The Combined Benefits

When ASC 842 and cloud computing are used together, they can bring about significant benefits, including:

1. Improved Data Accuracy: Combining the two technologies automates the lease accounting process, reducing the potential for errors, ensuring consistently accurate data.

2. Streamlined Process: Businesses can manage their leases centrally through dedicated software. This eliminates the hassle of managing different leases through different internal departments, which can be time-consuming and expensive.

3. Enhanced Decision Making: With more consistent data and more relevant information from the software, stakeholders can make more informed decisions.

Conclusion

In conclusion, ASC 842 and cloud computing provide businesses with an opportunity to streamline processes, minimize costs, and maximize efficiency. When combined, they bring about a range of benefits, including reduced errors, smoother operations, more informed decision-making, and greater flexibility. If you haven’t yet adopted these technologies, it is time to consider them seriously to stay competitive in today’s ever-evolving business landscape.