SEC Disclosures Stress Balance Sheet Impact of Lease Accounting Standards

LeaseAccelerator released the results of its first SAB 74 Disclosure Analysis for Lease Accounting report, an assessment of recent SEC filings related to the adoption of ASC 842. The report includes comments issued by the 100 U.S. companies with the largest dollar value of leasing obligations. Key findings include:

  • Material Impacts to Balance Sheets – 76% of the Top 100 reported that there will be a material impact resulting from the transfer of most right-of-use assets and liabilities on to corporate balance sheets. Another 20% are still analyzing the potential impacts of the new standard. Only 8% provided quantitative estimates of the material impact to the balance sheet, which ranged from $1.2 billion to $13 billion.
  • Impacts to Income Statement – 28% of the Top 100 reported that there will not be a material impact to their income statement from ASC 842. Another 66% are still analyzing the impacts.
  • New Policies and Controls – 18% are evaluating or implementing new policies and controls to support the standard.
  • Lease Accounting Software – 18% are evaluating or have selected a lease accounting software application.
  • Project Teams – Only 13% indicated that a project team had been formed to address the new standard.

“As expected, the SAB 74 disclosures confirm that most companies are expecting a material impact to their balance sheets when they adopt ASC 842 and IFRS 16,” said Michael Keeler, CEO of LeaseAccelerator. “However, the lack of implementation progress suggests there is still a long road to compliance for many large lessees, each of which will need to implement new Enterprise Lease Accounting systems, policies and controls.”

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