Important new standards for revenue recognition and leases are causing difficulty for corporate financial statement preparers, a new survey shows.
Just 29% of corporate preparers said their companies have a clear plan to implement the new revenue recognition standard, according to a KPMG LLP survey of nearly 400 financial executives at the firm’s annual Accounting & Financial Reporting Symposium.
The revenue recognition standard was issued in May 2014 by the US Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) in an international convergence project but is undergoing clarifying changes as a result of questions raised with the boards’ joint transition resource group. The standard was designed to create comparability across industries and jurisdictions, with a more principles-based approach than previously existed for US GAAP reporting entities.
Many respondents to KPMG’s survey have much work to do in implementation. More than half (55%) of the respondents said they are still assessing the new revenue recognition standard’s effects, and 27% said they have taken no action while they await the completion of the standard-setting.
As preparers work to implement the revenue recognition standard, FASB and the IASB are completing their lease accounting projects. The IASB issued its leases standard earlier this month, with FASB expected to follow with a release in February. The standards are not converged, but both will bring liabilities and assets for leases onto company balance sheets in an effort to provide more transparency for investors.
Financial statement preparers have significant work to do before they are ready to provide that transparency. Just 13% of the KPMG survey respondents said they have a clear plan for implementation, and 9% said they would implement the standard in 2016 or 2017. Instead, most participants expect to implement the standard in 2018 (18%) or 2019 (49%).
“Both standards will require significant effort, and these results demonstrate the complexity of implementation across entire organisations,” John Ebner, KPMG’s national managing partner–audit, said in a news release.
The survey also found that:
- Nearly one-third (31%) of respondents said their highest concern outside their financial reporting responsibilities is internal controls over financial reporting.
- About one-fourth (26%) of respondents were most worried about data infiltration and IT security.
- One-fifth of respondents were most worried about tax compliance.
“The existing regulatory focus on internal controls over financial reporting and the here-and-now have overshadowed last year’s fear of any unknown future regulatory changes that may or may not occur,” Ebner said.
—Ken Tysiac (firstname.lastname@example.org) is a CGMA Magazine editorial director.