The Impact of ASC 842 Standard on Cloud Computing Adoption
The introduction of ASC 842 has had a significant impact on the way companies classify, value, and disclose the lease obligations in their financial statements. While companies have struggled with compliance, the standard has also acted as a significant driver of innovation within the sector. One of the most significant areas where this impact has been felt is in cloud computing adoption. In this article, we explore why the ASC 842 standard is propelling cloud computing adoption and the benefits that businesses can reap from this move.
What is ASC 842 Standard?
Before diving into the relationship between the ASC 842 standard and cloud computing, it is essential to first understand what the standard is all about. This accounting standard was introduced by the Financial Accounting Standards Board (FASB) in 2016 to address the issues with the previous lease accounting standard (ASC 840). The primary objective of ASC 842 is to ensure that leases are recorded on the balance sheets, which was not the case with the previous standard. The new standard requires companies to recognize lease liabilities and corresponding right-of-use assets, providing a more accurate picture of the company’s financial position.
How the ASC 842 Standard is Driving Cloud Computing Adoption
The ASC 842 standard has had a monumental impact on lease accounting, but it has also acted as a significant driving force behind cloud computing adoption. One of the primary advantages of cloud computing is that it enables businesses to access the latest technology at an affordable price point, which has become increasingly essential in today’s competitive market. With the adoption of ASC 842, companies are not only recording their leased assets better, but they are also recognizing the benefits that cloud computing has to offer.
By adopting cloud computing, businesses can access the latest hardware and software without having to make heavy upfront investments. Companies can also enjoy scalability options with cloud computing, which makes it easier to expand their infrastructure as their business grows. This scalability feature is particularly useful for companies that operate across different locations and require remote access to their leased assets.
The Benefits of Cloud Computing Adoption
Apart from the increased accessibility, cloud computing offers several other benefits that can significantly impact a business’s bottom line. One of the primary advantages of cloud computing is that it enables companies to reduce their hardware and maintenance costs. Rather than purchasing and maintaining hardware infrastructure, businesses can move their operations to the cloud, where the infrastructure is managed by third-party providers. This results in significant cost savings, which can be redirected to other critical areas within the business.
Additionally, cloud computing has made it easier for businesses to handle data and information effectively. With the ability to store, manage, and analyze large amounts of data at scale, businesses can make informed decisions that can help improve their operations. The utilization of cloud-based business intelligence tools has enabled businesses to enhance data analysis, improve decision-making, and increase real-time collaboration.
Conclusion
In conclusion, the ASC 842 standard has revolutionized lease accounting, and its impact has been felt across the business world. One of the significant benefits of the new standard has been the increase in cloud computing adoption, which can help businesses remain competitive and agile in today’s dynamic market. The advantages of cloud computing are numerous and range from reducing maintenance costs to enhancing data management and analysis. Businesses that have not yet explored the benefits that cloud computing has to offer are encouraged to do so, and the adoption of ASC 842 could be the perfect opportunity to do this.
