ASC 606 & ASC 842 Implementation Services – XoraH PLLC

ASC 606 & ASC 842 Implementation Services

Intro to Services

ASC 606 and ASC 842 are the two most broadly impactful accounting standards issued by the FASB in the last decade. Together, they changed how companies account for their most fundamental economic activities — earning revenue from customers and obtaining the right to use assets under lease arrangements. Despite having been effective for several years, many private companies are still in the process of adopting one or both standards, and many that have adopted them have done so incompletely.

Our ASC 606 and ASC 842 implementation services address both standards — separately or together — with the full-scope implementation support that gets it done right. We bring the technical accounting depth to navigate the judgment-intensive aspects of each standard, and the implementation discipline to deliver a complete, auditable result. We serve companies throughout Florida and nationwide.

Why These Two Standards Are Often Implemented Together

For many companies, particularly those in service industries, technology, and real estate, ASC 606 and ASC 842 create overlapping implementation demands. A technology company implementing ASC 606 for software license revenue may simultaneously need to address ASC 842 for its office leases and data center agreements. A professional services firm adopting ASC 606 for its long-term contracts may have significant embedded leases in its service agreements that require evaluation under ASC 842.

Implementing both standards together — rather than sequentially — allows for coordinated policy elections, consistent transition methodology decisions, and a single integrated disclosure package. It is also more efficient: the scoping, impact assessment, and auditor coordination work that both standards require can be conducted in parallel rather than repeated twice.

ASC 606 Implementation

Revenue Stream Scoping and Impact Assessment

We begin ASC 606 implementation by mapping your revenue streams and customer contract types — identifying all arrangements that fall within the scope of the standard and assessing the accounting treatment required for each under the five-step model. This scoping work surfaces the judgment areas that will require the most attention and drives the policy development and transition accounting that follows.

Performance Obligation Identification and Allocation

The identification of distinct performance obligations within customer contracts is the most consequential judgment in ASC 606 for many companies. We analyze your contracts for distinct goods and services, evaluate whether bundled arrangements contain multiple performance obligations, and determine the standalone selling prices used to allocate the transaction price. Our conclusions are documented at the contract-type level, providing a replicable framework for new contracts going forward.

Policy Elections and Practical Expedients

ASC 606 provides several practical expedients that can reduce implementation complexity: the portfolio approach, the right to invoice practical expedient, the one-year contract cost expedient, and others. We evaluate each expedient in the context of your business and recommend a set of elections that simplify ongoing compliance without sacrificing the accuracy of your revenue reporting.

ASC 606 Transition Accounting

We calculate the cumulative effect of ASC 606 adoption under the modified retrospective method — the opening retained earnings adjustment required to reflect the difference between revenue recognized under prior guidance and what would have been recognized under ASC 606. Alternatively, for companies electing full retrospective adoption, we restate the comparative periods presented.

ASC 842 Implementation

Lease Population Identification

ASC 842 requires recognition of virtually all leases on the balance sheet — including many arrangements that were not previously classified as leases under ASC 840. We conduct a comprehensive lease population identification exercise — reviewing contracts, vendor agreements, service arrangements, and embedded leases to build a complete inventory of arrangements that meet the ASC 842 definition of a lease. Missing leases are among the most common ASC 842 implementation errors.

Lease Classification and Measurement

Each identified lease must be classified as an operating lease or a finance lease under the ASC 842 classification criteria — which differ meaningfully from the old bright-line tests under ASC 840. We classify each lease, calculate the right-of-use asset and lease liability at the commencement date, and prepare the journal entries required to recognize the lease on the balance sheet.

Practical Expedient Elections

ASC 842 provides a package of practical expedients — including the option to not reassess prior lease classifications, not reassess initial direct costs, and not separate lease and non-lease components — as well as the short-term lease recognition exemption. We evaluate each election and recommend the package most appropriate for your lease portfolio and reporting requirements.

ASC 842 Transition Accounting

Most companies adopt ASC 842 using the modified retrospective method, recognizing the cumulative effect adjustment as of the adoption date without restating prior periods. We calculate the transition entries — the right-of-use assets and lease liabilities to be recognized on the adoption date — and prepare the supporting schedules required for audit.

Joint Implementation — Disclosures and Audit Coordination

Both ASC 606 and ASC 842 require extensive new financial statement disclosures. We draft the complete disclosure package for both standards — integrated into a single, coherent set of financial statement notes. We coordinate with your audit firm throughout the implementation to ensure our conclusions and documentation align with auditor expectations and that the adoption is reflected correctly in the first set of audited financial statements.