Companies are ready for the leases standard, but only with help of interim solutions, temporary workers and bigger budgets.
Most companies expect to be ready to operationalize the required changes needed to comply with the new lease accounting standard. But that’s only with the help of interim solutions, temporary workers and external consultants, and larger budgets.
- 85% respondents say they’re on track to meet the leases implementation deadline.
- 3 in 4 have selected a long-term system for their leases project. Of those, however, 86% will still need an interim solution.
- 86% are using temporary contingent workers.
- 56% are bringing in consultants.
- 63% in 2018 vs. 42% in 2017 expect it will cost at least one million dollars to implement leases.
Compliance with the new leases standard has become a larger, more complicated endeavor than many companies originally anticipated. From choosing a system and gathering all relevant data from across the organization to deciphering contracts and identifying embedded leases, piecing together the data and IT puzzle, especially for complex global organizations, is core to the challenges many companies face, but also necessary for a successful implementation.
Complexity of data and legacy IT biggest challenges
Data collection is proving very difficult in complex organizations, many of whom have operations both domestically and abroad, which is driving the need for more help.
- 83% found inventorying and collecting international data for lease challenging.
- 78% say the same about domestic leases data.
- 75% cite establishing master data requirements as a challenge.
- 78% say finding the resources and skills within the current IT team has been difficult.
Was the revenue recognition experience a crystal ball for leases?
After three-quarters of reporting under the new revenue recognition standard, companies may still be feeling the changes.
- 51% describe their experience implementing changes for revenue recognition as very challenging.
- 72% anticipate significant systems and process change post-implementation.
With leases proving to be an even more complicated process than revenue recognition for some, the effective date isn’t the end of the road. Knowing that most companies are still dealing with the necessary revenue recognition changes two quarters past the 2018 deadline, it’s easy to anticipate that the same will be true for leases.
ACT – automation, collaboration and transformation are key considerations for success
Though adopting the new leases standard has presented its challenges, it’s important to take advantage of the bigger opportunity change like this can bring. At EY, we view leases through the lens of ACT – or automation, collaboration and transformation, which can take you from required change to business value.
- 83% are working toward designing a long-term automated solution.
- 81% say it’s difficult to collaborate effectively across multiple functions.
- 71% see leases changes as an opportunity to drive transformation.
About the survey: EY surveyed 304 finance and IT leaders from US-headquartered public companies across multiple industries, with annual revenues ranging from US$1 billion to more than US$10 billion, in July 2018 to highlight the key challenges and opportunities associated with lease accounting standards changes.