With less than two years to go before the Financial Accounting Standards Board’s new lease accounting standard takes effect, a recent survey from Robert Half Management Resources revealed that 80 percent of companies in nine business categories have yet to begin the transition – though finance companies are slightly ahead in certain preparations.
Robert Half, along with subsidiary Protiviti and an independent research firm, surveyed more than 2,200 CFOs at companies in 22 of the largest US metro areas. Besides finance companies, the CFOs represented organizations in retail, manufacturing, professional services, construction, wholesale, transportation, business services, and others.
“The new lease accounting standard is highly complex and affects all parts of organizations, so firms must be careful not to underestimate the time and work involved in adopting it,” Tim Hird, executive director of Robert Half Management Resources, said in a prepared statement. “Companies that haven’t begun the transition may find themselves behind before they even start.”
Part of the problem is that the new standard involves far more than just accounting.
“It requires new reporting processes throughout the business and updated training,” said Chris Wright, managing director of the financial reporting remediation and compliance practice for global consulting firm Protiviti. “The transition also necessitates a well-rounded change management initiative, which is proving to be a massive effort, especially for large companies, and particularly coming on the heels of the adoption of the new revenue recognition standard.”
For public companies, the lease accounting standard takes effect for fiscal years, and interim periods within those fiscal years, beginning after Dec. 15, 2018. For all others, the standard takes effect for fiscal years beginning after Dec. 15, 2019, and for interim periods within fiscal years beginning after Dec. 15, 2020.
Of the companies that have begun working toward compliance, the survey indicated that 18 percent have determined what work will be required to adopt the new standard, and 55 percent have investigated lease or property management systems that would help implement the new standard.
In addition, a majority of CFOs nationwide said their companies have already completed the following tasks:
- Determined who would be on the transition team (68 percent).
- Begun or have finished new written accounting procedures (67 percent) and policies (65 percent).
- Taken an inventory of system changes that may be required (65 percent).
- Developed a project plan to take care of what will be needed to adopt the standard (63 percent), though most haven’t begun the actual diagnostic work yet.
Except for an inventory of needed system changes (55 percent), finance companies were slightly ahead of the national data, with 66 percent to 75 percent having done the above tasks.
Geographically, companies in Atlanta were farther ahead (74 percent to 80 percent) in completing those tasks, and 90 percent of CFOs in that city said new accounting procedures and policies had been written. New York companies, on the other hand, haven’t fared as well, with only 36 percent to 54 percent having completed the same tasks.