2018 Q4 accounting change survey

Start adding items to your reading lists:
Save this item to:
This item has been saved to your reading list.

Updated survey gauges progress to date and challenges remaining

With new accounting standards taking effect soon — lease accounting for public companies and revenue recognition for private companies — are organizations meeting their implementation goals? Our Q4 accounting change survey gauges progress since Q2, top challenges and lessons learned so far. See highlights below or use our interactive data explorer to see results by industry, company size and more.

Leases: public companies sprint while privates still lag

Only 4% of public company survey respondents had completed their ASC 842 implementations, while 76% were more than halfway done. That’s an improvement over Q2 (see chart), but clearly much work remains to be done.

Conversely, 63% of non-public respondents had not yet completed the initial ASC 842 assessment phase, including 28% that had not yet started. Of non-publics still assessing the impact, 78% were less than halfway done with this initial phase.

Compared to Q2 a notable percentage of non-publics have shifted from assessment to implementation. But the percentage who have not started has not changed much.

Which of the following best describes your company’s status in adopting the new lease accounting standards?



Lease systems and costs: size matters, timing falters

Lease accounting systems are in flux, with 75% of public company respondents saying that they will either upgrade/modify existing systems (17%) or implement new systems (58%).

But will systems be ready in time? Nearly one-quarter of all reporting system changes didn’t expect -- or doubted -- going live before their effective date. Reasons cited include:

  • Functionality of new system not ready
  • Data migration challenges
  • Ran out of time
  • Still testing
  • Lacking resources

Desktop applications (e.g., spreadsheets) were favored instead of new systems to account for leases by more than half of non-public respondents -- versus just 22% of public company respondents. New systems are likely the significant cost element for implementing the new standard (see chart).

Also, lease accounting implementation costs were higher than originally budgeted or anticipated for about one-third of all public company respondents.

What tools will you primarily use to account for leases under ASC 842?

Tools to account for leases under ASC 842

What level of total incremental costs do you expect will be incurred to implement the new leasing standards?

Respondents with 1,000+ leased assets

Incremental costs for the new leasing standard
Incremental costs for the new leasing standard

Revenue recognition: still no hurry?

As the new revenue recognition standard will become effective for some private companies in 2019, 45% of non-public survey respondents were still not done assessing the impact — including the 17% that had not yet started. More than one-third of non-publics reported being in the implementation phase and 80% of them were more than halfway done.

By contrast, while 88% of public respondents indicated their effective date had passed, only 77% were done implementing the new revenue recognition standard — up from 66% in Q2. The remainder included:

  • 12% - non-calendar year-end companies completing implementation
  • 4% - remediating issues
  • 7% - automating processes

Revenue recognition implementation costs and resources proved to be a product of revenue complexity. Among public company respondents with 1,000 or more contracts:

  • 25% expect to spend $1 million implementing the new revenue recognition standard
  • 47% have revenue recognition implementation teams of 6 or more
  • 39% said that costs were higher than originally budgeted or anticipated.

Which of the following best describes your company’s status in adopting the new revenue standards?

Click Q2 or Q4 above to see the corresponding results.

When do you plan to adopt the new hedge accounting standard?

When will companies adopt the hedge accounting standard?
When will companies adopt the hedge accounting standard?

Additional survey findings

Hedge accounting: Half of public company respondents who use hedge accounting planned to implement the new guidance before the January 1, 2019 effective date (for calendar-year-end public business entities; one year later for all other entities).

Budgeting and forecasting had been ― or were expected to be ― modified as a result of ASC 606 adoption, according to 34% of survey respondents.

Future business model changes were somewhat or highly likely to impact revenue recognition, according to more than one-quarter of respondents, while 11% were unsure.

Deals impact: More than one-third of respondents said that deals had affected the timing or complexity of accounting change implementation.

Combined difficulty: 87% of respondents said that the combined difficulty of adopting recent accounting changes was somewhat or very difficult. Among the comments regarding difficulty:

  • Tremendous time and expense
  • Running at full throttle
  • Limited internal resources
  • Incredibly taxing
  • It's going to be tight
  • Less difficult if plan and start early
  • Personnel have been added

Top lease accounting implementation challenges

Top lease accounting implementation challenges

About this survey

  • Responses were collected using an open online survey during late October 2018
  • More than 450 finance professionals participated from a range of industries, with a majority (63%) coming from the industrial products/manufacturing; technology/media/telecommunications; energy/utilities; and retail/consumer sectors
  • 86% reported their title as CFO, controller or finance/accounting director or manager
  • 72% were from public companies
  • 91% were US GAAP reporters
  • 58% were from companies with revenue of $1 billion or more

Contact us

Chad Kokenge

Partner, Deals, PwC US

Shane Foley

Principal, Digital Risk Solutions Leader, PwC US

Robert Bishop

Consumer and Industrial Products & Services Finance Leader, PwC US

Brad White

Partner, Accounting Method and Fixed Asset Services Leader, PwC US

Follow us