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How to Prepare for the New Lease Accounting Standards

Lease accounting standardsNew lease accounting standards will go into effect for public companies for years beginning after December 15, 2018 (2019 year-end) and for private companies for years beginning after December 15, 2019 (2020 year-end). Those affected by the changes should be aware of the details and begin planning for implementation now. Planning will include heavy training for accounting departments as well as vendors and customers.

New Lease Accounting Rules

The Financial Accounting Standards Board has issued new rules to improve the financial reporting of leasing transactions. New requirements dictate that companies leasing facilities and equipment to others recognize the assets and liabilities of leases. Balance sheets must record the transaction details. Prior to this implementation, capital leases were the only type to require such documentation.

Establish a Committee

To guide the transition process, affected companies should establish committees to attend training events and become knowledgeable about the new standards. The group should be comprised of both accounting personnel and cross-functional project managers. The committee can then work to implement the process in a way that will work for the organization.

Educate Dealers, Vendors, and Customers

The Equipment Leasing and Finance Association has created a helpful white paper outlining the new method’s changes and benefits. Stakeholders should engage in conversations directly with the companies and receive this reading material for reference.

Corporate Accounting Teams

There are three factors for companies to consider, in addition to those listed above:

1. Accounting teams will need to identify all leases, preparing a current and accurate inventory. Once complete, the accounting team will be able to determine which leases the new mandate affects. It is also important to break out leases that are less than a year (and not reasonably certain that they will be renewed) as they may not be required to be capitalized as a right of use asset.

2. Accounting departments will need to examine how the new rules will change financial reporting and transactions, specifically for the company. In addition to examining basic paperwork changes, teams will also need to determine possible ripple effects, including those on taxation and business processes. It is important to accurately record the leases by breaking out the lease and non-lease components.

3. Accounting teams will need to determine whether current accounting systems can adequately handle the required changes. If accounting software or systems cannot handle the change, the team will need to work toward a solution. To assess the current systems, determine how easy it will be to create the proper accounting procedures. Not all software is designed to handle the change to the leasing standards. There is software that purports the use of algorithms to extract lease components from contracts to help with the efficient review of the contracts for lease components.

Making the Transition Smooth

The key to making the transition smooth for everyone is to plan early. Ensure everyone is onboard and educated before changes take place. With cross-functional collaboration, employees will be able to identify potential challenges and opportunities. Begin planning now to ensure a smooth process by meeting with your lessors to discuss the impact of the new leasing standards.

Whether you have a small business or a huge conglomerate, contact Gilmore Jasion Mahler to find out how we can help you prepare for the new lease accounting standards.

Michael Brough Gilmore Jasion MahlerGilmore Jasion Mahler Partner Michael Brough contributed this blog. Mike is a partner in the Gilmore Jasion Mahler assurance department with over 13 years of pubic accounting experience. Mike is a member of GJM's Manufacturing Specialist Group and works with clients in many other industries as well, including government and nonprofit.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting services and provides comprehensive services including assurance, business advisory, tax, risk advisory and healthcare management. The Firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.

How Well Do You Know Ryan?

Ryan Avery Gilmore Jasion MahlerHow well do you know GJM Senior Audit Associate Ryan Avery? You may have worked with Ryan for a while, but you’re sure to learn something new. Enjoy this Q&A.

Name and title: Ryan Avery, Senior Audit Associate

Describe your role at GJM. I work in our audit and risk assurance practice where I work closely with our clients to help them better understand the company’s potential risks and assist them with meeting reporting deadlines. I often have the privilege to help mentor our young staff and interns while on the job.

When did you start at GJM? I started right out of college with GJM in September of 2013.

Why did you choose the accounting industry? What first led me to the accounting industry was watching my uncle as a kid who was a financial advisor. He was always very successful, and I wanted to be like him when I grew up. When I got to high school, the only business class that was offered was accounting. Therefore, I decided to try it and enjoyed the challenges of my accounting classes throughout college and my internships.

GJM is quite involved in the community. Any particular programs or volunteer work you’ve enjoyed being involved in here? I have really enjoyed being a part of the Big Brothers Big Sisters Christmas party that GJM puts on ever year. I love seeing the excitement on the kids’ faces throughout the event.

What do you like best about the accounting profession? My favorite part of the accounting profession is that I am always learning new things. I am constantly learning not only from my co-workers but from our clients as well. I really enjoy getting to work with so many different types of people and seeing the logistics of many businesses.

Ryan Avery Gilmore Jasion MahlerAre you from the Toledo area originally? If not, where are you from? I was born in Toledo, raised in Perrysburg, and currently reside in Monclova. Northwest Ohio has always been home!

What do you like about living in Northwest Ohio? My favorite part about living in Northwest Ohio is most of my family lives in the area. With only having one sibling, it was nice growing up with my cousins around as well. I feel so blessed having such a close and supportive extended family.

Where did you go to school? I completed both my undergraduate and Masters of Accountancy degrees at Bowling Green State University.

Do you have any pets, hobbies, family? My wife says that I knew what I signed up for when I married her given that she is a self-diagnosed crazy cat lady. Currently we have six cats, three indoor and three outdoor. Our outdoor cats do a good job of keeping the mice out of the hay, which is great for our two horses. We enjoy taking them for rides at Oak Openings and to the ice cream shop. Our farm still felt like it was missing something, so in June we are getting a blue heeler to help keep everyone in line.

How do you like to spend your free time? When I am not hanging out with my animals, I am usually reading the latest Dave Ramsey or other business development books. I enjoy waking up early to meet up with my 5:30 am workout group. Recently, I have taken up woodworking. My wife loves this hobby, so I can build her more cat towers.

Are you involved in any community organizations, do any volunteer work? I am very excited to be leading a Financial Peace University class at my church this spring. My wife and I have recently started volunteering with our church at Vision Kitchen.

What is something people may be surprised to find out about you? I am always up for a challenge, which is why I think I enjoy doing extreme mud runs such as the Tough Mudder and Spartan races. I have also completed two 50-mile ultra-marathons. One of my goals is to complete a 100 miler in the near future.    

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting services and provides comprehensive services including assurance, business advisory, tax, risk advisory and healthcare management. The Firm's professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities

Construction Industry Workforce Challenge

A major financial concern for many Gilmore Jasion Mahler (GJM) clients in the construction industry is finding good people to do the work. You'll often hear about the workforce shortage in manufacturing, but it is also having a profound impact on contractors. GJM Partner Bob Bobek, CPA lead's the firm's Construction Specialist Group, working with many clients in the industry. 

If you're interested in more articles and information impacting your construction business, be sure to sign up for Gilmore Jasion Mahler's free quarterly e-newsletter On-Site. You may also want to sign up for Focus, GJM's e-newsletter offering tax updates and strategy for businesses. Just click here for quick and easy sign up.

Bob Bobek Gilmore Jasion MahlerBob Bobek is GJM's lead Audit Partner and has over 30 years of public accounting experience. As the lead of the Firm's construction team, Bob is very active with industry associations including the Association of General Contractors of Ohio (AGC), Ohio Contractors Association (OCA) and the Construction Financial Management Association of Northwest Ohio (CFMA).

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting and provides comprehensive services including assurance, business advisory, tax, risk advisory and healthcare management. The Firm's professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.

GJM Manufacturing Roundtable to Focus on Automation

Manufacturing automation Gilmore Jasion MahlerA transformation is underway in the manufacturing & distribution world. Change is coming at lightning speed. Is your business on track to remain competitive in a rapidly changing industry?

Gilmore Jasion Mahler will host financial executives from area manufacturing & distribution businesses for Automation Nation: A Panel Discussion on Robotics in Manufacturing. The roundtable events are Thursday, May 24 from 11:30 am-1 pm at Findlay Country Club and from 3-5 pm the same day at Brandywine Country Club in Maumee.

Expert panel members will address the impact of robotics and AI on productivity, workforce and the bottom line.  

Panel members include:

  • Jim Robey, Director, Regional and Economic Planning Services with the W.E. Upjohn Institute for Employment Research in Kalamazoo, MI
  • Tom Ballay, President, Autotec Engineering, Toledo, OH
  • Troy Wildermuth, Director of Manufacturing, Ohio Manufacturing Extension Partnership, Center for Innovative Food Technology (CIFT), Toledo, OH
  • Tim Mayle, Director, Findlay-Hancock County Economic Development

The events are free for financial executives from area manufacturing & distribution businesses. Due to the automation & robotics topic this spring, feel free to include your operations manager as well. If you know of another manufacturing financial executive who could benefit from the event, please feel free to forward this information on to them as well.

Some logistics:

The Findlay roundtable includes lunch. The Maumee event includes an optional social hour from 5-6 pm. Manufacturing financial executives and their operations managers can RSVP via email for either roundtable event at info@gjmltd.com. Please specify which event you’ll be attending. As always, should you have any particular issues you’d like to see covered at the event, feel free to note that when you RSVP.

Gilmore Jasion Mahler (GJM) established the Manufacturing & Distribution Financial Executive Roundtable series after learning that area manufacturers needed a way to come together to share best practices. Previous roundtable topics have included the technology disruption, company culture, employee engagement, the workforce shortage and the state of Ohio manufacturing.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in the region, with offices in Maumee and Findlay. Locally owned, GJM offers comprehensive services including assurance, business advisory, tax, risk advisory and healthcare management. GJM’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.

Spring Cleaning Your Tax Documents: What to Keep, What to Pitch

filing cabinet, tax filesAh spring is here! It’s a great time to tackle those projects you’ve been putting off all winter like a closet cleanout or that dreaded window washing. Don’t forget to clean out your tax files too. This is a great time of year to thin the herd, so to speak. Many of us tend to hold onto those tax documents and tax returns and supporting documents much longer than necessary. You may need that someday, right? Maybe you’re an admitted paper hoarder, but you’re now finally ready to purge and free up some space in the filing cabinet. You’re probably wondering how long to keep personal tax records. Here are some guidelines so you get it right.

Income tax returns:

The general rule, according to the IRS, is to keep your tax return for three years from the date of filing (or two years from the date you paid your tax bill). The IRS says be sure to also keep the supporting documents, like your W-2s and 1099s. The reason for the three years: that’s how much time you have to amend that tax return and how much time the IRS has to impose further tax.

Exceptions:

Of course there are always some exceptions…

  1. You need to keep personal tax records for six years if you’re not reporting income that you should be, and that income is over 25 percent of the gross income reported on your return.
  2. You need to keep records for seven years if you file a claim for a loss from worthless securities.
  3. You need to keep records indefinitely if you don’t file a tax return or if you file a fraudulent return (hopefully you’re not in this category!)

What to pitch and what to keep:

It’s hard to know when you open up that jam-packed filing cabinet at home what you can ditch and what you can’t. Just remember, not all documents are created equal. For example, any documents related to property. The IRS says you should hang onto records related to property until the period of limitations expires for the year you sell or dispose of the property.

Something else to keep in mind:

Just because you don’t need supporting documents for tax purposes anymore doesn’t necessarily mean you can pitch them. Some insurance companies and creditors may ask that you hold onto them longer than the IRS. 

State returns:

Double check with your state department of taxation or your tax preparer regarding how long you should keep a copy of your state tax return. This will obviously vary from state to state. The Ohio Department of Taxation says to keep copies of your state tax returns for at least 4 years from the deadline or the date you filed.

A couple of other thoughts:

  • Keep a copy. If you file your taxes online, you need to remember to always print out a copy of your return (and keep supporting documents) before you hit send to electronically submit your return. Don’t assume that there’s an online copy somewhere you’ll have access to. Be sure to print a copy for yourself if you file a paper return as well. 
  • If you’re moving away from paper files at home to an electronic filing system, it goes without saying that you should finely shred the paper documents once the information is safely stored (and backed up) electronically.

Happy purging!

Gilmore Jasion Mahler Partner Kathi IottGJM Tax Partner Kathi Iott contributed this blog. With over 20 years in public accounting, Kathy helps both individuals and businesses with tax strategy. She works across many industries, including construction and real estate.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting services and provides comprehensive services including assurance, business advisory, tax, risk advisory and healthcare management. The Firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.