Help for Audit Committees Overseeing Implementation of New Lease Accounting Standard
As The Ticker has previously reported, many public companies are unprepared for the January 1, 2019, deadline for implementation of the new lease accounting standard, and the SEC has specifically stressed the key role of audit committees in setting the right “tone at the top” by “actively monitoring the implementation efforts, including taking the time to understand, and assess the quality and status of implementation.” Two recent publications offer concise, practical guidance for audit committee members seeking to diligently exercise their oversight responsibilities with respect to timely implementation of the new lease accounting standard.
The Center for Audit Quality (CAQ) recently released a tool, “Preparing for the Leases Accounting Standard: A Tool for Audit Committees,” that includes an overview of the new standard and offers important questions for audit committee members to consider for successful implementation. The CAQ tool cautions that implementation of the new standard “is a significant effort” that “will affect multiple functional areas of an organization, including (but not limited to) accounting, tax, financial reporting, financial planning and analysis, investor relations, treasury (e.g., debt covenants), operations, procurement, legal, information technology and real estate.” The tool includes a list of executive summaries and more technical resources regarding the new standard.
In a June 4, 2018, article on CFO.com, William Andreoni, a finance and accounting consultant, describes implementation of the new standard as a “highly manageable initiative” and offers a roadmap for successful implementation. Audit committee members might consider using Andreoni’s four-page article as a guide when discussing implementation of the new standard with management.