Companies may not yet have a clear implementation plan for upcoming financial reporting changes, according to new research.
FASB has imposed two reporting changes, which will come into effect within the next two years: the revenue recognition standards and the leasing standards.
KPMG recently surveyed 800 audit committee members worldwide about their top challenges for 2017. In the US, respondents indicated varying levels of preparedness for the changing accounting standards.
The revenue recognition standards, which aim to create a more universal standard for how revenue is reported, will apply to annual reporting periods for public companies after December 15, 2017 and non-public companies after December 15, 2018.
Only 13 percent of the respondents say their company has a clear implementation plan, while 39 percent say their company is assessing the impact of the new standards or in the process of implementing a plan. A further 16 percent of respondents say they are not familiar with the new standards.
FASB’s new leasing standards, designed to improve the reporting of leasing activities, are a little further away, with implementation due for public companies on December 15, 2018 and non-public companies on December 15, 2019.
One in 10 respondents (9 percent) have a plan, almost one third (32 percent) say their companies are assessing the impact or implementing a plan and one in five (20 percent) say they are unfamiliar with the new standard.
‘Given the scope and complexity of those implementation efforts and their impact on the business, systems, controls and resource requirements, those efforts should be a key area of focus,’ KPMG’s report notes.
RISK MANAGEMENT CONCERNS
In addition to changing accounting standards, audit committees are concerned about their companies’ risk management programs.
Risk-management effectiveness, legal & regulatory compliance and managing cyber-security risk rank as the top three challenges for audit committees this year.
Slow economic growth, political uncertainty, cyber-threats, regulatory scrutiny and investor demands for transparency are all drivers for the concern around risk management, according to Jose Rodriguez, executive director of KPMG’s audit committee institute and the author of the report.
This confluence of factors is affecting confidence in companies’ existing risk-management programs. More survey respondents say their company’s risk-management policies require substantial work (42 percent) than say their company has a robust system in place (38 percent).
