Accounting Standards Certification 842

The purpose of Accounting Standards Certification 842 (ASC 842) is to improve the transparency and comparability of private, public, and non-profit organisations that use lease financing. It is a guidance issued by the Financial Accounting Standards Board (FASB) that outlines the criteria for determining whether a disposal of a component of an entity should be presented as a discontinued operation in the financial statements. Additionally, it provides guidance on the presentation and disclosure requirements for discontinued operations in the financial statements.

Why is Accounting Standards Certification 842 Important?

ASC 842 is important because it provides guidance on how to report discontinued operations in the financial statements. A discontinued operation is a part of an entity that has been disposed of or is classified as held for sale and is therefore no longer an ongoing part of the entity’s operations. The reporting of discontinued operations can provide useful information to investors and other users of financial statements by enabling them to better understand the financial performance and position of the entity.

By providing clear and consistent guidance on how to determine whether a disposal of a component of an entity should be presented as a discontinued operation, and how to present and disclose such operations in the financial statements, ASC 842 helps ensure that the financial statements provide relevant and useful information to users.

Who in an Organisation is Responsible for Accounting Standards Certification 842?

The management of an organisation is typically responsible for ensuring compliance with ASC 842. This includes identifying transactions that meet the criteria for presentation as discontinued operations, and properly presenting and disclosing such operations in the financial statements.

The management may also be responsible for implementing internal controls and processes to ensure that the reporting of discontinued operations is accurate and in compliance with the guidance provided in ASC 842. In some cases, the organisation’s finance or accounting department may play a key role in implementing and monitoring compliance with ASC 842. Ultimately, the responsibility for compliance with ASC 842 lies with the organisation’s management.

What are the Challenges of Accounting Standards Certification 842?

One of the main challenges of Accounting Standards Certification 842 is determining whether a disposal of a component of an entity should be presented as a discontinued operation in the financial statements. This can be difficult because the criteria for such presentation are based on factors such as the size and significance of the disposed component, the nature of the operations and cash flows of the disposed component, and the reasons for the disposal. As a result, it can be difficult to determine whether a disposal meets the criteria for presentation as a discontinued operation, and this determination can have a significant impact on the financial statements.

How Can Digital Transformation Benefit Accounting Standards Certification 842?

Digital transformation can benefit the implementation and compliance with ASC 842 in several ways. For example, using digital technologies such as data analytics and automation can help organisations more easily and accurately identify transactions that meet the criteria for presentation as discontinued operations. This can help ensure that such transactions are properly reported in the financial statements.

Additionally, digital technologies can be used to automate and streamline the processes for presenting and disclosing discontinued operations in the financial statements, reducing the risk of errors, and making it easier for management to ensure compliance with ASC 842. Overall, digital transformation can help organisations more efficiently and effectively comply with ASC 842 and provide more accurate and useful information to investors and other users of the financial statements.

What Technologies Benefit Accounting Standards Certification 842?

There are a number of technologies that can benefit the implementation and compliance with ASC 842. Some examples of such technologies include:

Data analytics: Data analytics tools can be used to analyse large amounts of financial data to identify transactions that meet the criteria for presentation as discontinued operations. This can help ensure that such transactions are properly reported in the financial statements.

Automation: Automation technologies can be used to automate and streamline the processes for presenting and disclosing discontinued operations in the financial statements. This can help reduce the risk of errors and make it easier for management to ensure compliance with ASC 842.

Enterprise resource planning (ERP) systems: ERP systems can be used to manage and track the financial data and transactions related to discontinued operations. This can help ensure that the reporting of such operations is accurate and in compliance with ASC 842.

Cloud computing: Cloud-based technologies can be used to store and access financial data and systems remotely, making it easier for organisations to manage and track the reporting of discontinued operations. This can help ensure compliance with ASC 842 and enable management to monitor and evaluate the financial performance and position of the entity more easily.