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Few Ready For Lease Accounting Standard

The lease accounting standard for publicly-traded companies is going into effect Jan. 1, 2019 yet few companies profess to be ready for it, according to a separate survey by Deloitte.

It found that just 21.2% of finance, accounting and other professionals say their companies are “extremely” or “very” prepared to comply with the standard, according to a recent poll from the Deloitte Center for Controllership. Granted, that's more than double the number expressing confidence from early 2016, which was 9.8, when the standards were initially issued, but still relatively low considering the deadline is less than a year away.

Last November FASB issued new proposed guidance to simplify the lease accounting implementation process, including: eliminating the requirement to evaluate pre-existing land easements to determine if they meet the definition of a lease under the new standard; introducing the option to not restate comparative reporting periods in transition; and providing lessors with the option of combining lease and non-lease components under certain conditions.

But even with the new guidance, only 10.2% of respondents anticipate the FASB's practical expedient measures will reduce the amount of time and effort needed to implement the new standard.

“These recent changes proposed by the FASB are all intended to help companies achieve a timely adoption but it's clear from the poll results that, despite the help, many companies will likely still struggle to be ready by the effective date,” said James Barker, senior consultation partner for lease accounting in the national office of Deloitte & Touche LLP.