How to Manage a New Accounting Standard Implementation Project
Published by XoraH PLLC | Accounting Advisory Insights | Accounting Advisory Services | Accounting Standard Implementation Resources
When the FASB issues a new accounting standard, companies face a challenge that goes well beyond reading the guidance and making a journal entry. A standard implementation is a managed project that requires planning, cross-functional coordination, policy decisions, system changes, and new disclosure requirements. All current accounting standards and updates are published and maintained by the FASB on FASB’s published accounting standards page. Companies should monitor this resource to stay current on both new standards and narrow-scope amendments to existing guidance.
Phase 1: Impact Assessment
The first phase of any implementation is understanding the scope of the change. A thorough impact assessment involves:
- Reading the standard and understanding its core requirements
- Inventorying the company’s transactions, contracts, and business activities within the standard’s scope
- Identifying the accounting policy elections the standard allows and assessing which are appropriate
- Estimating the financial statement impact of adopting the standard
- Identifying changes needed to accounting systems, processes, and internal controls
Phase 2: Policy Elections and Documentation
Most GAAP standards include explicit policy elections — choices that must be made in applying the standard. These elections are often irrevocable once made and can have significant ongoing financial statement implications. Examples: ASC 842 practical expedients; ASC 606 progress measurement methods; ASC 805 private company goodwill alternatives. Policy elections should be made deliberately — with a clear understanding of financial statement impact.
Phase 3: Transition Accounting
Most new standards require a specific transition method — either full retrospective (restating all prior periods) or modified retrospective (cumulative effect adjustment to opening retained earnings, no restatement). The transition method affects which periods are restated, how the opening balance sheet is adjusted, and what disclosures are required. Transition calculations must be documented and supported with workpapers that auditors will examine.
Phase 4: System and Process Changes
New accounting standards often require changes to the company’s systems and processes. ASC 842 requires companies to maintain a lease schedule tracking ROU assets and lease liabilities for every lease in their portfolio. Similarly, ASC 606 may require changes to how contracts are categorized in the billing system, or how variable consideration estimates are monitored and updated each period. System and process changes take time to design, implement, and test.
Phase 5: Disclosure Preparation
New accounting standards typically require new or expanded financial statement disclosures in the period of adoption and on an ongoing basis thereafter. The required disclosures for ASC 842, for example, include a maturity analysis of lease liabilities, weighted-average discount rates, weighted-average remaining lease terms, and a breakdown of lease costs by category — none of which existed under ASC 840.
Common Implementation Pitfalls
- Starting too late: standard implementations have effective dates that cannot be extended
- Underestimating scope: particularly for ASC 842, the lease population is often larger than expected when embedded leases are included
- Neglecting system changes: implementing the accounting without operational systems to maintain ongoing compliance creates a burden that compounds every period
- Inadequate disclosure: first-year disclosures are frequently incomplete, leading to audit findings
Related Service
Our firm provides Accounting Standard Implementation Services — managing the full implementation lifecycle from impact assessment and policy elections through transition accounting, system guidance, and first-period disclosures. Accounting Standard Implementation Services
If your company is approaching a standard implementation deadline, contact our team. Contact Our CPA Firm | Accounting Standard Implementation Services
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How to Manage a New Accounting Standard Implementation Project
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Joshua Hogan is a Certified Public Accountant (CPA) and the founder of XoraH PLLC. XoraH PLLC provides expert accounting advisory services that help private equity firms and corporate acquirers in the middle market navigate complex GAAP requirements, manage transactions with confidence, and build the financial infrastructure needed for long-term growth.