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Newest poll gives more evidence of heartburn over leasing

Tammy Whitehouse | August 1, 2017

At the half-way mark from the publication of the new lease accounting standard to its effective date for public companies, nearly half of C-suite executives are wringing their hands over whether implementation will get done on time. That’s the conclusion of the latest poll taking the pulse of Corporate America as anxiety starts to build over the enormity of accounting change on the horizon.

A recent Deloitte webcast poll of more than 2,500 C-suite executives found only 40 percent were not concerned about their company’s ability to adopt the new lease accounting requirements by their respective deadlines. Public companies are required to begin applying the new rules in 2019, while private companies have an extra year. Another 47 percent in the Deloitte poll said they were somewhat or very concerned about whether the job of transitioning to the new standards would get done on time.

“We had a three-year window from issuance to effective date, and we’ve burned through half of that now,” says James Barker, senior consultation partner at Deloitte. “Yet we still see a significant percentage of corporate leaders somewhat concerned about their ability to adopt the standard on time.”

That makes it tricky to assure not just an adequate implementation, but a quality one, says Barker. Companies are starting to face resource constraints as they recognize the need for information technology systems changes or upgrades, he says. Solution providers are filling up their books of business and some aren’t promising they can deliver systems changes in time to comply, he says. Of course, public companies are also wrestling with the final stages of adopting new rules on revenue recognition, which take effect in 2018, a year ahead of leasing.

As the effective date draws closer, executives are also expecting the task to be more difficult than they originally imagined, according to the poll, although very few ever thought or still think it will be an easy task. As of May 2017 when the poll was taken, 47 percent expect the effort to be somewhat difficult, up a few percentage points from a year earlier. Only 10 percent said they expected it to be somewhat easy to adopt the new rules, down from 15 percent a year earlier.

Executives still consider the data collection effort — inventorying and centralizing all lease obligations and gathering the data necessary to comply with the new accounting — to be the most challenging part of implementing the standard. In terms of preparation, executives say their organizations are making some progress, with 31 percent reporting their organizations are unprepared to comply, down from 44 percent a year earlier. Still, only 11 percent said they were very prepared or extremely prepared.