The deadlines for the new revenue and lease accounting standards are rapidly approaching. How do your implementation efforts compare to your peers?
The new revenue recognition standard has posed greater implementation challenges than anticipated by many companies. For companies that have been focused on implementing the new revenue standard, the timeline to implement the new leases standard has become condensed. Therefore, companies need to swiftly complete their revenue standard implementation efforts and start work on their leasing implementation.
In our annual accounting change survey, KPMG polled companies representing all major industries (76 percent public and 24 percent private) to gauge where they stand in their efforts to comply with the new revenue recognition and leasing standards.
- While we see an improvement in the percentage of companies moving beyond the assessment stage compared to last year, 60 percent of public companies acknowledged that they are facing challenges and continue to run behind schedule with their revenue standard implementation efforts due primarily to competing priorities and human resource constraints.
- Compared to last year, fewer companies expect to implement system changes to automate their revenue recognition requirements. This is not surprising, as many are running out of time and finding that significant system changes will have to wait until after the effective date.
- As companies begin their leasing implementation efforts, nearly 60 percent indicated that they have been surprised by some of the challenges they are running up against, including identifying embedded leases and selecting and implementing an adequate leasing system.
- Forty percent of companies also cited that their leasing implementation costs are exceeding the amount budgeted a year ago, caused largely by a realization that they will need new lease accounting software and having to spend more time than expected to identify, abstract, and enter leases into a system.