As Lease Standard Deadline Looms, Only 20 Percent of Companies Say They Are Ready

Chris Gaetano
Published Date:
Apr 2, 2018
By Photos public domain [Public domain], via Wikimedia Commons

Companies are still struggling to get ready for the new lease standards from the Financial Accounting Standards Board (FASB), even as the effective date is now less than a year away, according to The core feature, around which the entire standard is based, is that all leases are now required to be recognized on the balance sheet, whereas before it depended on what type of lease it was. Under the new standard, however, all leases, regardless of type, will now be listed on the balance sheet, with the total lease payments recognized as a liability, and the right to use the leased item as an asset.

While the measure was finalized in 2016, and had been a topic of heavy discussion even years before that, companies have consistently struggled to make the changes necessary to implement it. A 2014 survey found that only 1 percent of companies were prepared for the new standards, a 2016 survey found only 13 percent had a clear plan for implementation and 49 percent thought they wouldn't be ready until 2019, and a 2017 survey found that 47.1 percent of C-suite executives were concerned about their ability to implement the standards on time versus 11.4 percent who said they were extremely or very prepared. 

The latest results show similar levels of uncertainty, though they now come at a point where companies have only nine more months before the effective date. 21.2 percent said they were ready to comply with the new standards. What's more, 40 percent of companies have already exceeded the amount initially budgeted to implement the new standards, and 60 percent are surprised by the challenges they are running into. The main issue is collecting all the necessary data, though another challenge is that the lease standard will go into effect around the same time as another major change, revenue recognition. 

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