Midway through the first year of complying with new lease accounting rules, only a little more than half of public companies said they completed their transition.
That was the result of a recent survey by LeaseQuery, which found only 54 percent of public companies reporting they had wrapped up their transition to Accounting Standards Codification Topic 842 bringing leases into financial statements. Another 24 percent said they were still deploying software and migrating data into a new lease accounting or lease management system.
Even further behind, 6 percent said they were still evaluating software, and 9 percent said they were in the midst of collecting and consolidating lease accounting data. Another 6 percent said they had initiated a project, and 1 percent said the activity to that point amounted to assessing an implementation plan.
Public companies were required to begin reporting their financial results reflecting the new lease accounting rules in annual periods beginning after Dec. 15, 2018, as well as interim periods within their first annual period. For calendar-year companies, that meant a Jan. 1, 2019, start date, although companies with fiscal years that do not correlate to the calendar year had different start dates depending on when their fiscal year began.
The results suggest accountants are underestimating the effort necessary to transition to the new rules, according to LeaseQuery. “Transitioning to the new standard is a complex, time-consuming process, even when you have the best team and tools on your side,” said George Azih, CEO of LeaseQuery.
The survey included not only public companies, but also private companies and non-profit organizations, which have a more extended time line to implement the standard. The Financial Accounting Standards Board is considering deferring their effective date an additional year, in part due to ongoing activities among public companies to move toward full compliance with the standard.
The survey asked companies that were in the early stages of implementation how much difficulty they expected to face to transition to the new rules; half were neutral, and more than 10 percent said they expected it to be easy or somewhat easy. Less than half anticipated difficulty.
Among companies further into the process, however, difficulty factors increased considerably. Only 10 percent said the job had been easy or somewhat easy, and only 23 percent were neutral. Another 67 percent said it had been difficult or somewhat difficult.