First it was revenue recognition (ASC 606 & IFRS 15). Then came lease accounting (ASC 842 & IFRS 16), followed by new hedge accounting guidance -- just to name a few of the recent new standards. To find out how companies are coping with the unprecedented wave of accounting changes, we surveyed finance executives about their revenue recognition, leasing and hedge accounting transition experiences. Highlights are summarized below. See our accounting change survey data explorer to take a deeper dive and analyze the results based on industry, company size and other variables.
One-third of public company respondents were still at work implementing the new revenue recognition standards, which included non-calendar year end companies and those doing post-effective date work. Meanwhile 57% of non-public respondents were not yet done assessing the impact. One-third of public company respondents reported having six or more full-time equivalents focused on implementing revenue recognition, with 15% having teams of more than 10 people. Implementation costs are noted in the chart.
More than half of public company respondents expect to make significant system changes to implement the new lease accounting standards, increasing to:
Of the public companies making significant changes, nearly one-third were unsure or did not think they would go live with their system changes by the effective date of the new standard. Meanwhile, non-public companies that have until 2020 to comply with the new lease accounting standards are just getting started (see chart). Of those still working on their assessments, 83% are less than 50% complete.
Video: Lease accounting change progress update.
The hedge accounting changes, while generally less impactful, came fast on the heels of revenue recognition and leasing. Still, the majority of survey respondents who use hedging have already adopted the new accounting guidance or plan to this year. More than half also expect their hedging strategy to change in some way -- such as increasing their use of hedging or applying hedge accounting to additional risk management strategies.
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