by Brianna Crandall — July 19, 2017 — Twenty-three percent of companies have not yet started to implement the new lease accounting standards for public companies to report leases on financial statements, nearly 18 months after they were promulgated by the Financial Accounting Standards Board (FASB) (ASC 842) and International Accounting Standards Board (IASB) (IFRS 16), according to a new survey from global commercial real estate services and investment firm CBRE and global professional services firm PwC.
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.
Jeff Beatty, senior managing director of CBRE’s Financial Consulting Group and leader of the company’s Global Lease Accounting Task Force, stated:
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.
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. According to CBRE, 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 that have started implementing the new standards, 47 percent report expending a greater-than-expected effort.
Sheri Wyatt, partner within PwC’s Capital Markets and Accounting Advisory Services practice, added:
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. 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.”
Peter Kitchin, director of Portfolio Services for the Americas, CBRE, pointed out:
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.
To read the full survey results of the 2017 Lease Accounting Survey: Implementation Progress Report as well as key findings and methodology online, visit the PwC Web site.