Although the deadlines to adopt the Financial Accounting Standards Board’s new lease accounting standard draw closer, many firms have yet to approach the starting line. A Robert Half and Protiviti survey of finance leaders found only 44 percent of companies have begun the transition.
Public companies will need to adopt the new standard by 2019. All other organizations must adopt it by 2020.
Even among companies that have moved to adopting the standard, much work remains. Fewer than half of respondents at these organizations (48 percent) reported completing an assessment of how much needs to be done. In addition, the road to adoption is filled with challenges, namely training staff, diagnosing the necessary changes and finding professionals who have the requisite expertise, according to financial executives surveyed.
View data tables with the results, including additional steps firms have completed, by company size and industry, and infographics with responses by city.
“Companies cannot underestimate the amount of work required for the new lease accounting standard,” said Tim Hird, executive director of Robert Half Management Resources. “Firms that haven’t started risk being in catch-up mode the moment they do and scrambling to find experienced professionals who can quickly step in to help organizations meet the new guidance.”
The research suggests finance leaders see previous revenue recognition work as a stepping stone for lease accounting. Seventy-one percent of financial executives reported the revenue recognition transition has been the more challenging of the two, and 83 percent expect to apply at least some of the learnings from that process to the lease accounting adoption.
“Companies may be tempted to pause and take a breath after completing their revenue recognition work, but time is a luxury they don’t have,” said Chris Wright, managing director of the financial reporting remediation and compliance practice for Protiviti, a Robert Half subsidiary. “Adopting the new standard requires a substantial effort to prepare a firm’s people, processes and systems. For example, identifying and implementing a lease administration system and abstracting relevant data from leases require a significant investment of time and resources. Although lessons learned from the revenue recognition transition are valuable, not every organization was as impacted by that standard as they will be by new lease accounting rules.”
Hird added, “Staffing lease accounting initiatives often proves difficult for organizations. Because the guidance is still relatively new, many companies lack the necessary expertise. In response, businesses are working with outside consultants and interim professionals, either to access the requisite skills or to help cover day-to-day accounting needs left open by full-time employees taking on lease work.”
Research Highlights by Company Size
Only 37 percent of the smallest companies in the survey, which have 20-49 employees, have started the lease accounting adoption process. Conversely, 69 percent of firms with 1,000 or more employees have begun the transition.
Firms with 100-249 and 1,000 or more employees report finding employees with the needed skills as their top challenge with the transition. This also ranks among the top three issues for the smallest companies.
Research Highlights by Industry
Business services firms are most likely to have begun the transition (71 percent).
Only 31 percent of executives in the retail/wholesale industry and 25 percent in construction said their organizations are currently working on adopting the new standard.
Research Highlights by Metropolitan Area
Atlanta (81 percent) and Cleveland (72 percent) have the largest percentages of companies that have started the lease accounting work, while Salt Lake City (19 percent) and Boston (22 percent) have the smallest.
Chicago (48 percent) and St. Louis (45 percent) finance leaders most frequently reported being able to apply most learnings from the revenue recognition transition to lease accounting.
About the Survey
The survey was developed by Robert Half and Protiviti and conducted online by an independent research firm. It is based on responses from more than 2,000 finance leaders from companies in more than 20 of the largest U.S. metropolitan areas.