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Accounting

Most Finance & Accounting Leaders Still Need a Dedicated Software System for the New Leases Standards


According to a recent global survey, over 70 percent of lessees and lessors do not yet have a dedicated software system able to handle the new Leases Standards required changes.

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Organizations are challenged to assess needs, design specifications, and oversee the implementation of new IT solutions, and time is running out. According to new research by Deloitte, most finance and accounting leaders plan to finalize the design of required changes by mid-year 2018 and complete implementation by December 31, 2018.  Despite this, over 70 percent of finance and accounting leaders do not yet have a dedicated software system able to handle the new Leases Standards (IFRS 16 and ASC 842) required changes.

Fifty-seven percent of respondents plan to opt for externally developed leasing systems that can be managed internally, 20 percent see no need to change their current leasing software or lease contract management system, while 26 percent say they’re already equipped with the necessary software systems.

Deloitte lead partner on the survey Laurence Rivat explained that, though the Leases Standards may represent less of a challenge than Revenue Recognition, the software systems that worked for that implementation may not be sufficient for this one. “I would say the lease standards are less complex [than revenue recognition] to implement, but for many companies it does require a new IT solution. Whereas perhaps for the revenue standard, some may just have been adapting their IT solution to some extent. From what I can see from the field, it's different for the leases. The scope of this change is broader for the leases standards compared to the other standards.”

Almost 50 percent of respondents indicated they will have more than 1,000 lease contracts, with many having more than 5,000 lease contracts at hand. On whether clients were considering taking on interim “off-line” (i.e. Excel-based) solutions, Rivat shared, “As soon as you get over more than 1000 contracts or so, Excel is just very difficult ... it doesn't work. The calculations are too complex. You have too much of a concern with the quality of the data and in the controls. Many of the companies thought that Excel could be a solution and the more they progress and the more they make their impact assessments, the more they realize that Excel actually will not be the solution.

“Maybe for the smaller entities or maybe the ones who don't have so many these contracts, but as soon as the population gets numerous you need to have a dedicated software solution.”

Providers are working diligently on developing their solutions to be ready on time. “Companies and providers are working extremely hard to implement the systems and ensure that the systems are capable of providing the data by the end of the year,” said Rivat. “Adjustments are still being made. The test runs are still in progress.”

Though companies are understandably concerned with the readiness of systems providers, Rivat pointed out that the effort required by workers should not be ignored. “There is a huge effort and technology has not always helped to collect the data or scan the data and sometimes it has to be manual. Human resources in this task should not be underestimated.”