Private Companies Still Far Behind on Lease Accounting Standards

A new survey shows that as many as 75% of senior finance and accounting professionals are not yet compliant with the new ASC 842 lease accounting standards.

The survey was commissioned by Visual Lease, a lease optimization software provider and included results from 500 senior finance and accounting professionals. This report marks the first release under The Visual Lease Data Institute, a collection of market-leading data, trends and insights on lease accounting, management and optimization created and curated by Visual Lease.

The 2021 Lease Accounting Market Analysis: The Road to Readiness for ASC 842 explores the journey, opportunities and barriers that companies face in their efforts to comply with the new accounting standard published by the Financial Accounting Standards Board (FASB), which requires them to track and fully disclose all qualifying leased assets, including commercial real estate and equipment leases. The report was informed by a proprietary survey of 500 senior finance and accounting professionals at private organizations with more than 1,000 employees. It excludes public sector organizations and governmental entities, which have to comply with a similar lease accounting standard.

Key highlights of the report include:

Real Business Opportunity – All surveyed senior finance and accounting professionals recognize that complying with ASC 842 will offer their companies substantial benefits, including more transparent valuation of the organization (54%), cost savings (54%), easier preparation for audits (53%) and the ability to make strategic lease decisions (50%).
Need for Urgent Action – Despite the significant business opportunity that comes with lease accounting compliance, of the 75% of surveyed companies who are not yet fully compliant, nearly half (46%) are less than halfway through or have not yet begun the process. Moreover, a shocking one in five respondents admit that achieving full compliance has been a low business priority.
Pandemic Delays – Many private companies may now be playing catch-up from the impact of Covid-19, with more than two in five respondents (43%) noting that their organization’s process has been delayed due to the global pandemic.
Race Against the Clock – With the December 2021 deadline for private companies less than five months away, two in five respondents (40%) are only somewhat, not very, or not at all confident about their organization being ready to reach full compliance with ASC 842. One reason why? More than two in five (42%) surveyed admit that the ASC 842 compliance process has taken more time than expected, which puts those who have not started the process at serious risk. This is particularly concerning considering the average anticipated staff hours to gather all the necessary lease information to fully adopt ASC 842 is 1,334 hours, equivalent to more than 33 weeks of full-time labor for a highly skilled worker.
Companies Can’t Do It Alone – More than one in three (36%) of senior finance and accounting professionals surveyed note that they don’t have the right people, technology and tools in place. High among the things they consider to be essential in the process are implementing new (48%) or upgrading existing (51%) lease management and accounting software.
Not a One-and-Done Disclosure – Reaching ASC 842 compliance in time for the standard’s effective date is only part of the battle. Ninety-nine percent of respondents expect to face ongoing challenges maintaining compliance after the 2021 deadline. Among the most anticipated challenges include accurately tracking and managing future modifications to leases, adopting new technologies to optimize the process and continuing to train and educate staff.

“We understand just how complex lease accounting is,” said Marc Betesh, founder and CEO of Visual Lease. “For 35 years, we’ve seen firsthand how tight lease portfolio management can amount to millions of dollars in savings and improve business performance. With the deadline for private companies to comply with ASC 842 rapidly approaching, we knew it was the right time to gather our insight, experience and expertise to provide you with the first report under The Visual Lease Data Institute. Our goal is simple – to arm you with the information you need to feel confident about your organization’s lease accounting compliance journey.”

For full studyresults and helpful guidance towards ASC 842 compliance, download The 2021Lease Accounting Market Analysis: The Road to Readiness for ASC 842.