Only 26.3 percent of public company execs say their implementation of the lease accounting standard is complete, according to a new survey by Deloitte, even though they were supposed to begin using it this year.
Most have already disclosed using the new standard in at least one reporting period since the effective date of Dec. 15, 2018 for public companies, but that doesn’t mean they’ve finished implementing the new leases standard.
“Most of our U.S. public company clients have completed initial compliance activities, but very few have fully completed their broader lease implementation efforts,” said Deloitte Risk Financial Advisory managing director Sean Torr in a statement. “I suspect we see a low rate of U.S. public company executives calling implementation ‘complete,’ because they’ve realized that ongoing work is necessary to build sustainable, long-term lease accounting programs.”
The Financial Accounting Standards Board recently proposed to delay the effective date of the leases standard for private companies from Dec. 15, 2019 to give them an extra year to get ready, until Dec. 15, 2020 (see FASB issues proposal to delay new standards). But many executives polled by Deloitte are finding the process challenging, as more than half of executives at privately held organizations with 100 or more real estate and/or equipment leases in their portfolios describe lease accounting implementation as “difficult.”
“Just as private organizations can be large and complex, so can their lease portfolios,” said Deloitte private leader Mark Davis in a statement. “Even though the new, FASB-proposed extension would give U.S. private companies an extra year to implement the standard, that does not mean they should slow their efforts or wait until next year to get started. Many private entities have a lot of hard work still to do to hit the deadline.”
In addition to FASB’s leasing standard for businesses, its sister organization, the Governmental Accounting Standards Board, also has a new leases standard for state and local governments, as does the Federal Accounting Standards Advisory Board for the federal government. But Deloitte found that for executives in the public sector, only 11.4 percent of federal agency employees and 12.4 percent of state/local government or higher education institution employees are prepared for their compliance deadline, which for most falls on or after Dec. 15, 2019.
“We hear from government and higher education professionals that the challenges they’re experiencing include a lot of the same pain points public companies contended within their own lease accounting implementation efforts,” stated Blake Rodgers, an audit and assurance partner at Deloitte. “Ideally, some of the lessons learned by public companies can benefit those implementing for government entities.”