Baker McKenzie Senior Counsel & Society member Dan Goelzer's new update: "Companies Continue to Struggle With Lease Accounting as the Deadline Looms, but the FASB Throws a Lifeline" summarizes the state of play regarding companies' implementation of the new lease accounting rules based - in part - on a recent KPMG survey that revealed that just 25% of the nearly 400 respondents said their implementation work was "on track," and describes the transition relief afforded by FASB's July 30th ASU 2018-11, Leases (Topic 842), Targeted Improvements, which allows companies to apply the standard at the adoption date in lieu of the earliest period presented in the financial statements. Practically speaking, the welcome ASU avoids two years of restated financials and ASC 842 disclosures for 2017 and 2018.
Dan comments:
Audit committees should be monitoring the company's progress on leasing standard implementation. As KPMG's survey highlights, many companies still have a significant amount of work to do, and the audit committee should make sure that management has identified the open issues and has a realistic plan to deal with them. Internal controls around new accounting systems and processes are a particularly important aspect of the compliance effort that should not be neglected – especially if the company is going to be forced to rely on interim measures before permanent systems are in place. The KPMG survey report concludes with a section entitled "Getting Over the Finish" that briefly outlines steps companies that have not completed implementation should be taking now. These steps might serve as a useful oversight checklist for the audit committee.