This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies.
The Accounting Policy & Practice Report ® provides financial accounting policy makers, advisors, and practitioners with the latest news, expert insights, and guidance on emerging, evolving,...
U.S. companies—facing challenges on how they will account for some of their leasing contracts under new rules—are starting to worry about whether the computerized systems they’re putting in place will be ready for the complex tasks required.
“A number of companies are reporting their concerns” about the leasing IT systems they’re evaluating as they purchase and bring on the systems, John Bober, global technical controller for General Electric Company’s GE Capital arm, said June 22 at a meeting of FASB and FEI’s financial reporting committee.
“They’re concerned that the systems are not in the proper state, they will not have a good quality control system over financial reporting when they go live on Jan. 1, 2019,” Bober said at the meeting of FEI Committee on Corporate Reporting.
Many companies have subsequently changed their tune when reporting their prospects for preparation of the new standard. The companies are signaling to the accounting rulemakers that “complications” in lease terms and reporting indicate that spreadsheets and relatively simple record-keeping won’t do the job anymore, Financial Executives International found in the recent poll.
The balance sheets of airlines, retailers, many banks, hotel and restaurant chains, telecoms and other companies are expected to balloon under the FASB standard, ASC 842, issued in early 2016.
Individual companies will have to book on their balance sheets—rather than simply disclose in footnotes to financial filings—what could be billions of dollars in lease liabilities. Public companies will also have to perform an analysis of their internal controls on their financial reporting of leases even if the amounts involved are not large.
They want to avoid run-ins over those controls with auditors and Washington regulators.
One-third of companies on the committee have concerns about the readiness of systems providers, according to a preliminary review of the poll results. The committee believes that the final figure may be higher as more companies formally choose the specific IT system for recording and tracking leases for accounting purposes.
The FEI committee, made up of dozens of controllers and chief accountants from Fortune 500 and other companies, earlier had sent messages to FASB that various simplifications and “practical expedients” in the 2016 leases rules would help produce a smooth transition to the new accounting.
The basic model for U.S. accounting for leases also won’t change markedly, beyond the landmark first-time booking of lease obligations on the balance sheet.
FASB members voiced some surprise on learning of the fresh worries of companies stemming from more involved tasks of shifting to IT systems for cataloging and tracking leases, and about the possible lack of readiness in 2019.
FASB Chairman Russell Golden told Bloomberg BNA, that companies are signaling that “the actual IT systems” companies are adopting present a risk of lack of readiness “and they need to monitor it, and I think that we need to monitor it.”
“They need to make sure that they have the IT systems in place in a timely manner,” Golden said, referring to U.S. companies.
To contact the reporter on this story: Steve Burkholder in Norwalk, Conn. at sburkholder@bna.com
To contact the editor responsible for this story: S. Ali Sartipzadeh at asartipzadeh@bna.com
Copyright © 2017 Tax Management Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to books@bna.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to research@bna.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)