Twenty-three percent of companies have not yet started to implement the new lease accounting standards, nearly 18 months after they were promulgated by the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB), according to a new survey from CBRE and PwC US.
Of those who say adoption is “in progress,” 52 percent say they are only 0 to 25 percent complete. The new lease accounting standards go into effect in 2019 for public companies.
“The survey results confirm that many public companies, for various reasons, including concentrating on implementing the new revenue recognition standard in 2018, have not been focused on the new lease accounting standards. These companies are now beginning to realize they are only six quarters away from the effective date and that it is time to pick up their pace,” said Jeff Beatty, Senior Managing Director of CBRE’s Financial Consulting Group and leader of the company’s Global Lease Accounting Task Force.
The survey results do indicate greater focus in this area, with 66 percent having formed an internal working group to address the adoption of the new standards. This is an important first step for any company as the complexity and nuances of the new standards will require greater collaboration and sharing of information between business units than they are accustomed to.
Of the companies who have started implementing the new standards, 47 percent report expending a greater-than-expected effort.
“Given the breadth and potential systems and process changes associated with implementing the new standards, companies should consider a phased approach that begins with a current-state assessment focused on lease inventory, processes and data and system capabilities,” said Sheri Wyatt, Partner within PwC’s Capital Markets & Accounting Advisory Services practice. “Some companies may be underestimating the time and effort required, but a comprehensive assessment will ultimately provide better clarity around the length and complexity of adopting these new standards.”
The survey found that data collection and systems are among the biggest challenges facing most companies, with 75 percent of respondents indicating these implementation issues are “somewhat or very difficult.”
“Many companies will find that they will likely need to consider the integration of third-party lease administration software into their process given the complexity and additional data required to comply with the new standards,” said Peter Kitchin, Director of Portfolio Services for the Americas, CBRE.
For the full survey results, key findings and methodology, click here.