On February 25th, the Financial Accounting Standards Board (FASB) issued its lease accounting standard (Topic 842), intended to improve financial reporting around leasing transactions.
The same day, Financial Executives Research Foundation (FERF), in collaboration with EY, launched the Lease Accounting Changes Survey. Through our research, we hope to learn more about and address some of the following issues:
- How familiar companies are with the new standard.
- What actions, if any, have companies taken to prepare for the new standard?
- What obstacles might companies face in implementing the new standard?
- What implementation areas should companies focus on first?
- Are there potential cost savings as a result of system upgrades or system- related process improvements?
The final results of this research will be released at the June 16, 2016, Lease Accounting conference to be held in Dallas, Texas.
FASB developed the new standard “to increase transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet and disclosing key information about leasing arrangements.”
Industry professionals suggest companies use the new standard to reconsider not only their lease accounting, but also the systems used to track and measure leasing arrangements.
The new lease accounting standard will take effect in 2019 for publicly traded companies, but will require comparative financial information that may require the implementation of system and process upgrades by 2017.
However, Erik Bradbury, Financial Executives International’s Professional Accounting Fellow, said in a recent Professional Accounting Update, “Entities should strongly consider using 2016 to prepare for this significant accounting change.” Even for financial preparers preoccupied with other standard implementation efforts, delaying lease accounting changes closer to the 2019 implementation date is a recipe for disaster.