Data Collection Stifling Companies’ Lease Implementation Efforts
Officials from Avis Budget Group Inc. and General Dynamics Mission Systems say collecting data during the implementation process for the Financial Accounting Standards Board’s (“FASB”) leases standard has slowed compliance efforts. At a December 6 conference in Washington, D.C., company officials described their adoption of Accounting Standards Update No. 2016-02, Leases (Topic 842), as being more intensive than expected.
The FASB issued the standard to simplify lease accounting for companies. However, since corporations lease a wide range of items, the assets could produce a massive amount of data to gather and review. Adena Lerner of General Dynamics Missions Systems, for instance, emphasizes with conference attendees how much time it takes for her company to identify rental arrangements that are eligible under the leases standard and then search for any supporting documents.
Avis Budget’s Cathleen DeGenova noted that multinational companies encounter additional challenges with the standard. DeGenova said Avis Budget was unprepared for how decentralized its international leases are. The company acknowledged equipment rentals of small-dollar items covered a slight portion of its costs and were too immaterial to be accounted for under the leases standard. Avis Budget still reviewed the leases, but DeGenova remarked that her company is considering a materiality look at its equipment.
Public companies must comply with the lease accounting standard in 2019. If your company needs assistance complying with the new guidance, Cherry Bekaert’s Roy Amler is available to help.