Equipment lease management company LeaseAccelerator announced the results of a 2016 market readiness survey for the new lease accounting standards.
The first research study to be completed since the Financial Accounting Standards Board (FASB) announced ASU 2016-02 (ASC 842), surveyed financial professionals about their state of readiness for the new leasing standards.
The survey also asked respondents to assess the maturity of their processes and systems for managing leased equipment such as aircraft, trucks, forklifts, laptops and data center gear.
The study found that 85% of respondents were in the process of reading, studying, and implementing the new standards. Less than 10% of respondents believed they had the right systems in place to comply today.
Of those surveyed, 42% were expecting the implementation of the new standards to be “pretty painful” or “extremely painful.”
Additional findings of the study included:
“Only a handful of companies have adopted best practices for the accounting and administration of their equipment leases,” said Michael Keeler, CEO of LeaseAccelerator. “The majority are relying on spreadsheets with no clear organizational owner or KPIs. Companies should get started now implementing the necessary systems, processes and controls if they are going to meet the deadlines for the new lease accounting standards.”
On behalf of LeaseAccelerator, in March 2016, an independent, third-party research firm surveyed over 150 treasury, accounting, finance and tax professionals at Fortune 1000 companies about their readiness and expected challenges with implementing the new lease accounting standards.
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One Reply to “Survey: Companies Dependent on Spreadsheets to Manage Equipment Leases”
What I have been able to discern from articles I have read is that a great deal of flexibility is going to be needed on the lessee side to accommodate an ever changing portfolio of leased equipment. Our company, PAMS-DCF, Inc has that newly created (2015) exact system based on the very flexible EXCEL database. Our system will do the present value analysis on any cash flow, the asset booking entries and a portfolio analysis capable of easy update and immediate recompilation of the effective yield or present value for the updated composite assets providing an accurate rolling present value balance and amortization analysis through it’s portfolio features. Go to PAMSDCF.com for a detailed capability overview. Obviously, there are many more lessees than lessors. The job handed down by the FASB is much larger than I believe they realize. A system such as PAMS-DCF is the only way to manage a large portfolio of leased equipment from the lessee side assuming the company really intends to comply with the new standards, and that may a larger than life assumption and some time in coming.
I could write an article on the new accounting requirements with real simple and complex examples of cash flows and the use of the composite portfolio options available in the new rules to create a rolling net present value and amortization expense. I would use PAMS and thus it would be self-promoting, but some system is needed and PAMS will do a nice job. Is there an interest on your part to possibly publish such an article. For me, it would be like entering a time warp to be published in the Monitor again as I had several articles published in the 70’s in the old Monitor and the Equipment Finance Journal (Caruso’s publication back in the day). Let me know.