Financial executives are anticipating trouble adjusting to the lease accounting standard that the Financial Accounting Standards Board released in February, as FASB also rolls out its new credit loss standard Thursday.
Senior executives at nearly 60 percent of the 125 companies polled expect to make moderate to significant balance sheet adjustments for the lease accounting standard, according to a new
While 50 percent of all respondents have yet to take steps to prepare for the new leasing standard, 11 percent of the companies have started to perform a readiness assessment and another 7 percent said their project team has begun to create an inventory of lease data.
Nearly 75 percent of the respondents expect to have significant or moderate difficulty developing policies, processes and internal controls and to experience some difficulty getting through the first-year audit.
“Hearing from senior-level financial executives from more than 125 companies, we know that businesses are aware of the challenges they may face given the new leasing guidance,” said FERF and FEI president and CEO Andrej Suskavcevic in a statement. “However, we hope this research will spur companies into action so they will be well educated and prepared to meet the challenges of implementing the new lease accounting standards. We stand ready to assist our members and the industry to educate themselves and put best practices into action today.”
Eighty-three percent of the executives polled said they have not started to create a budget for meeting the new standard. Only 5 percent reported they have designated more than $500,000 over the next three years to comply with the standard. More than 50 percent of the survey respondents are planning to adopt the leasing standard as of the effective date, as opposed to adopting the standard early.
While a majority of the respondents rely on spreadsheets to track and account for leases, more than 80 percent are still evaluating their technology options.
“Preparing for the new lease accounting standard should be a priority for companies,” said EY Americas lease accounting change leader Anastasia Economos, a partner at Ernst & Young LLP Financial Accounting Advisory Services. “Companies who have started to assess their capabilities are gaining clarity on how the standards will impact their financial operations and what they need to do around data, process and technology.”
EY Financial Accounting Advisory Services is participating in Financial Executives International's event, “The New Lease Accounting Standard Conference: What You Need to Know” Thursday in Dallas.
