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.
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.
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:
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.
Respondents with 1,000+ leased assets
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:
Revenue recognition implementation costs and resources proved to be a product of revenue complexity. Among public company respondents with 1,000 or more contracts:
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:
Partner, Deals, PwC US
Principal, Digital Risk Solutions Leader, PwC US
Consumer and Industrial Products & Services Finance Leader, PwC US
Partner, Accounting Method and Fixed Asset Services Leader, PwC US