More than one-half of companies expect to increase the amount of time and effort spent on implementing the new Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) lease accounting standards in the coming year.
In a recent poll by Deloitte 54,7% of respondents indicated that they expect their organisations to get ready for the implementation of lease accounting standards in 2017.
In some sectors, respondents expect to spend considerably more time and effort on lease accounting implementation. These sectors include: automotive (77,1%); health plans (65,9%); health care providers (62,8%); industrial products and services (61,7%); retail, wholesale and distribution (61,3%); and media and entertainment (61%).
“For the many companies impacted by the new lease accounting standards, the biggest challenge may be in identifying leases themselves,” said James Barker, senior consultation partner in the national office of accounting services of Deloitte & Touche LLP. “Identifying equipment leases embedded within service arrangements and evaluating so-called secondary use arrangements where an asset is utilised without disrupting its primary use — like ads on the side of a building or cable wires added to utility-owned poles — are areas where many companies are focused.”
Lease accounting compliance challenges expected in the coming year include collecting all required lease data in a centralised, electronic inventory (24,7%) and implementing multiple new accounting standards, such as revenue recognition or current expected credit loss (CECL), simultaneous to lease accounting (16,3%).
Leading the charge in lease accounting implementation for more than half (55,2%) of respondents’ organisations is the controllership function, according to Deloitte. Just 13,8% reported that the task was a collaborative effort involving the controllership, information technology, real estate and treasury professionals.
“It makes sense to have the controllership heavily involved in lease accounting implementation, but we’re encouraged to see that some organisations are teaming more broadly on the effort,” said Sean Torr, Deloitte Advisor managing director, Deloitte & Touche LLP. “Any organisation’s lease portfolio can impact myriad groups, so leveraging a multidisciplinary taskforce can help more teams realise value from the large operational undertaking of lease accounting implementation.”