Almost half of corporate c-suite executives are concerned about their organisation's ability to implement the new US standards for lease accounting, IFRS 16 Leases. There are 18 months before compliance is required for US-based companies but a recent poll by Deloitte found that 47.1 per cent of executives had serious doubts about their company's ability to comply.
The Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) issued the new lease accounting standards at the beginning of 2016 and the compliance deadline is 1 January 2019. Read more about what IFRS 16 means in these two CTMfile articles:
- IASB brings lease accounting into the 21st century
- IASB convinced IFRS 16 will create transparency on leasing
Complexity of IFRS 16
Deloitte's Sean Torr said: “The large number of executive leaders still expressing concern regarding lease accounting implementation halfway into the three-year preparation window is indicative of the complexity of the issue.”
Torr urges companies to start preparing soon, as implementation often takes longer than you might think. Preparation activities for lease accounting implementation might include:
- process and system enhancements,
- data collection and validation, and
- effective stakeholder engagement.
The poll also found that:
- 31.4 per cent of executives said their companies were not prepared to comply with the new lease accounting standard;
- 11.4 per cent of respondents reported their companies were extremely or very prepared to comply;
- 7.8 per cent of corporate leaders expect their organisations to adopt the new lease accounting standards early (fewer than in March 2016, when the figures was 10.8 per cent).
Deloitte's survey asked 2,150 c-suite executives and other executives about lease accounting implementation, with respondents work mainly in consumer & industrial products, financial services, and technology, media & telecommunications.
CTMfile take: This poll really shows that preparing to comply with IFRS 16 (for US-based companies) is really complex and protracted. Best start ASAP to ensure your company complies in time for the 1 January 2019 deadline.
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