Survey: Retail sector least prepared to comply with new FASB lease accounting standards

Just 9.8% of more than 5,400 financial and accounting professionals say their companies are prepared to comply with the new Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) lease accounting standards.



That is one of the highlights of a recent Deloitte poll. http://www.slideshare.net/DeloitteUS/new-lease-accounting-standards-are-companies-prepared-to-comply-62702689



“Following the release of both new lease accounting standards, it’s clear that creating a centralized, electronic repository of all equipment and real estate leases held should be a priority for companies with leased assets,” said Sean Torr, director leading Deloitte Advisory’s efforts around the new lease standards, Deloitte & Touche LLP. “Those organizations facing the fastest compliance timeline are publicly traded and operating on a calendar fiscal year.



Respondents said the top challenges to lease accounting implementation are collecting necessary data on all organizational leases in a centralized, electronic repository (33.3%); and instituting processes to evaluate quarterly adjustments for the balance sheet, as well as profit and loss statements (20.5%).



“Having a lot of leases or just a few complex leases in your portfolio can create management challenges. Other difficulties can arise due to disparate tracking systems, expanding global footprints and M&A activity,” said James Barker, national office senior consultation partner, Deloitte & Touche LLP.



Not surprisingly, sectors with higher numbers of leases expected the highest level of difficulty implementing the lease accounting standards. Retail and distribution led in the rankings of the highest Industries with more than half (61.2%) of respondents expressing concern.



“While the new lease accounting standards may seem a niche accounting or finance concern, they are not. I’d encourage any leader of an organization with real estate or equipment leases to take the time now to learn about the potentially broad-reaching impacts of these new accounting requirements.”



Early steps recommended by Deloitte to evaluate the implications of the new lease accounting standards can include:



• Assess your organization’s current lease landscape, discerning lease volumes and types, availability of electronic lease data and data gaps within them, as well as any potential accounting, tax and process-related challenges.



• Develop a cross-functional project management team to coordinate implementation activities with necessary resources to support it.



• Build a granular implementation plan to manage efforts that may span various business units, file types, IT systems, languages and geographies.



• Plan to invest time in lease data abstraction, as culling contracts to get to details needed for lease accounting and disclosure will require a plan and resources of its own.



• Determine if your organization’s IT infrastructure can support compliance with the new standard(s) with which it must comply, including comprehension and management of new storage, calculation and reporting requirements.