The Center for Audit Quality has released a publication to help audit committees oversee their companies’ implementation of the new leasing standard.
The new lease accounting standard is set to take effect for public companies next January. However, only 21 percent of finance, accounting and other professionals said their companies are "extremely" or "very" prepared to comply with the upcoming standard, according to a recent survey by Deloitte.
“The new standard is broad and will fundamentally change how companies account for leases,” said CAQ executive director Cindy Fornelli in a statement. “Investors are looking to understand the impact of the new standard, and our tool is designed to help audit committee members, auditors, and company management understand that impact and plan for a timely implementation.”
The CAQ’s new publication, Preparing for the New Leases Accounting Standard: A Tool for Audit Committees, provides an overview of the leasing standard, along with the main questions that audit committee members should consider to allow for a successful implementation. In addition, the document features a list of resources produced by leading auditing firms and the American Institute of CPAs.
The new standard will probably require a significant amount of time and resources for companies to implement because it will affect a number of divisions within the organization, including accounting, tax, financial reporting, financial planning and analysis, investor relations, treasury, procurement, and real estate, the CAQ noted. It also starts to take effect only one year after the effective date of the new revenue recognition standard, another major accounting change requiring significant implementation effort by both company management and boards of directors.
“With required effective dates beginning in January 2019, the new leases accounting standard is broad and will fundamentally change how companies account for leases,” said the publication. “Investors are seeking to understand the impact of the new standard, and it is important now for audit committee members, auditors, and company management to understand that impact and to plan appropriately for a timely implementation.”
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