Most Canadian companies haven't started lease accounting transition
Smaller Firms Lagging Behind; Organizations Experiencing Multiple Challenges
TORONTO, May 25, 2018 – Although the deadlines to adopt the International Accounting Standards Board's new lease accounting standard draw closer, many firms have yet to approach the starting line. A Robert Half and Protiviti survey of finance leaders found only 26 per cent of Canadian companies have begun the transition.
Public companies will need to adopt the new standard by 2019. All other organizations must adopt it by 2020.
Even among companies that have moved to adopting the standard, much work remains. Two in five respondents at these organizations (40 per cent) reported having started but not completed an assessment of how much needs to be done. In addition, the road to adoption is filled with challenges, namely training staff, diagnosing the necessary changes and finding professionals who have the requisite expertise, according to financial executives surveyed.
"With the adoption date just around the corner, companies can't afford to underestimate how intensive an undertaking the new lease accounting transition will be," said David King, president of Robert Half Management Resources. "Firms that have yet to assess for key technologies, personnel and processes, risk overlooking significant compliance requirements in their rush to get the new standard in place."
The research suggests financial leaders see previous revenue recognition work as a stepping stone for lease accounting. Seventy-two per cent of financial executives reported the revenue recognition transition has been the more challenging of the two, and 86 per cent expect to apply at least some of the learnings from that process to the lease accounting adoption.
"Companies may be tempted to pause and take a breath after completing their revenue recognition work, but time is a luxury they don't have," said Chris Wright, managing director of the financial reporting remediation and compliance practice for Protiviti, a Robert Half subsidiary. "Adopting the new standard requires a substantial effort to prepare a firm's people, processes and systems. For example, identifying and implementing a lease administration system and abstracting relevant data from leases require a significant investment of time and resources. Although lessons learned from the revenue recognition transition are valuable, not every organization was as impacted by that standard as they will be by new lease accounting rules."
"Consultants who have experience implementing new accounting initiatives are an excellent resource for companies feeling overwhelmed by the changes," added King. "Not only can these professionals help develop procedures, they can also provide expertise not available internally, and support training efforts to ensure staff are equipped to navigate the standard post-transition."
Research Highlights by Company Size
• Only 18 per cent of the smallest companies, which have 20-49 employees, have started the lease accounting adoption process. Conversely, 49 per cent of firms with 1,000 or more employees have begun the transition.
• Firms with 100-249 employees report finding employees with the needed skills as their top challenge with the transition.
• The two largest sizes of organizations, 500-999 and 1,000 or more employees, are more able to apply most of their revenue recognition learnings to the lease accounting transition.
Research Highlights by Industry
• Finance firms are most likely to have begun the transition (54 per cent).
• Only 16 per cent of manufacturing executives said their organizations are currently working on adopting the new standard.
• Business services firms struggle the most with updating technology, while finance companies have issues adequately training staff.
• Professional services and construction companies are least able to apply their learnings from revenue recognition to the lease accounting transition.
About the Survey
The survey was developed by Robert Half Management Resources and Protiviti and conducted online by an independent research firm. It is based on responses from more than 270 finance leaders in Canada.
News provided by Robert Half Canada.