The FASB’s new lease accounting standard might not arrive until 2019, but your company has no time to lose to get in compliance. Recent research indicates that a lot of your peers have serious work to do.
A new report from LeaseAccelerator, a company that offers equipment lease management software, indicates that 85% of respondents are in the process of reading, studying, and implementing the new standards.
Less than 10% of respondents believed they had the right systems in place to comply today. And 42% were expecting the implementation of the new standards to be “pretty painful” or “extremely painful.”
Additional findings of the study included:
- Equipment leasing lacks a consistent owner at many companies. Thirty-one percent of those with large leasing programs had no designated owner.
- Most companies do not have an up-to-date inventory of their leases. Sixty-four percent of companies with large leasing portfolios stated it could take months.
- Most companies do not have a system of record in place for equipment leases. Almost 65% were using spreadsheets or “a little of everything” to track these assets.
What’s in the new rules
A quick refresher course on the new accounting requirements, as outlined in a recent LeaseAccelerator press release:
Developed over a period of ten years by the Financial Accounting Standards Board and International Accounting Standards Board, the new lease accounting standards change the way public companies will report leases in their quarterly and annual financial statements.
Many real estate and equipment leases, previously only disclosed in the footnotes of investor filings will now be capitalized on corporate balance sheets. The IASB estimates that over $2.2 trillion in assets and liabilities will transfer onto corporate balance sheets in the coming years.
The implementation deadlines for the new standards start in 2019. However, companies will also have to provide three years of comparative income statement, beginning on Jan. 1st, 2017 for calendar year end filers.
The LeaseAccelerator study, the first of its kind since the Financial Accounting Standards Board (FASB) announced ASU 2016-02 (ASC 842), surveyed financial professionals about their state of readiness for the new leasing standards. The survey also asked respondents to assess the maturity of their processes and systems for managing leased equipment such as aircraft, trucks, forklifts, laptops and data center gear.