Almost half of all top level corporate executives are concerned about their organizations’ ability to implement new lease accounting standards on time, according to a poll by professional services firm Deloitte.Almost half of all top level corporate executives are concerned about their organizations’ ability to implement new lease accounting standards on time, according to a poll by professional services firm Deloitte.
The survey of over 2,150 respondents took place a year and a half after the issuance of the new accounting standards from the Financial Accounting Standards Board’s (FASB) and International Accounting Standards Board’s (IASB), and a year and a half before compliance begins for US-based public companies.
Deloitte found that 47.1% of C-suite and other corporate executives are concerned about missing the deadline. Those in the oil and gas sector registered the highest level of anxiety (56.2%), followed by consumer products (55.9%); retail, wholesale and distribution (54.3%); health care providers (53.6%); and media and entertainment (52.6%).
“The large number of executive leaders still expressing concern regarding lease accounting implementation halfway into the three-year preparation window is indicative of the complexity of the issue,” said Sean Torr, Deloitte risk and financial advisory managing director, Deloitte & Touche LLP. “Lease accounting implementation has several long lead-time activities, including process and system enhancements, data collection and validation, and effective stakeholder engagement. These activities require a broader scale and scope than many companies initially contemplated.”
Executives showed modest improvement on the preparation front. In Deloitte’s latest poll, 31.4% said their organizations were unprepared to comply with the new lease accounting standard, trending lower than in October 2016 (34.9%) and March 2016 (43.6%) shortly after the FASB and IASB standards were issued.
Only 11.4% of respondents reported their organizations were extremely or very prepared to comply in the recent poll, rising slightly from October 2016 (11%) and March 2016 (7.9%).
“Continuing focus on the fast-approaching revenue recognition standard has likely limited the attention placed on the new leasing guidance,” said James Barker, senior consultation partner for lease accounting in the national office of Deloitte & Touche. “We are also starting to hear from companies with real concerns about their ability to implement the new leasing standard by the required adoption date. These concerns largely relate to perceived systems needs and limited resources to implement systems.”
Just 7.8% of corporate leaders expect their organizations to early adopt the new lease accounting standards, a drop from March 2016 (10.8%). Similarly the number of executives who said lease accounting implementation would be easy lowered to 11.4% from March 2016 (17%).