Roughly half of public companies expect to spend as much time—or even more—working on lease accounting adoption after the first quarter as they have leading up to their first reporting under the new standard.
That’s the finding of a recent Deloitte Webcast poll, where roughly one-quarter of more than 950 participants said they expect to spend the same amount of time and effort on lease implementation activities after they file their first quarter reports, and nearly as many said they plan to spend even more time. As of mid-February, when the webcast occurred, 61 percent of participants said their organizations were prepared for the effective date and 31 percent said they were somewhat prepared, while 7 percent said they felt unprepared.
Accounting Standards Codification Topic 842 requires companies to begin reporting virtually all of their lease-related assets and liabilities in their financial statements beginning Jan. 1, 2019, for calendar-year public companies. While historic standards long required companies to track leases and report most of them in footnotes, companies have faced significant difficulties gathering all of their lease contracts and implementing appropriate software or hardware solutions to begin reporting lease obligations in financial statements.
As of Deloitte’s polling date, 53 percent of companies said they were working toward compliance using a software system specific to the new lease accounting rules while 31 percent said they were relying on some combination of existing software and manual solutions to produce their first reports, Another 13 percent said they didn’t know, they were still trying to determine the method, or they were reassessing their technology plans because their first approach did not work.