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Two-thirds of large companies find new lease accounting standards more complex than anticipated with particular challenges in the areas of modifying business processes, collecting data and deploying software. A progress report published by LeaseAccelerator, an enterprise lease accounting software provider, has gauged the readiness of large companies to support the new lease accounting standards (ASC 842) one year after their initial publication. The study surveyed over 250 respondents in the accounting and finance functions at large public and private US-based corporations. The key findings include:    Companies are starting to take action with two-thirds reporting to be ahead of schedule or on-schedule. Roughly 70% of companies have assigned a formal project manager, indicating an executive-level commitment towards resourcing the project. However, fewer than 30% have taken the next step of assigning a formal budget for the project. A noteworthy 25% of companies reported that the project has not started yet; Nearly two-thirds of companies are finding the lease accounting project more complex than originally anticipated. The top three implementation challenges are: modifying business processes; collecting the data; and deploying new software; More than one-half of companies have defined the list of data required and have taken an inventory of their lease portfolio. Approximately one-third of companies have progressed even further by collecting 25% or more of their overall lease accounting data. Leases from the IT, fleet and other equipment categories are proving the most challenging to analyse along with leases embedded in service contracts and outsourcing agreements; and Approximately 70% of companies have defined a lease accounting software strategy, but less than one-third have issued a request for approval, selected a vendor or started loading data. Best-of-breed enterprise lease accounting providers and existing enterprise resource planning vendors are the most likely to be considered for software needs.  According to Michael Keeler, CEO of LeaseAccelerator, the firm has witnessed a significant surge in new business over past six months as an increasing number of Fortune 1000 organisations move into the software selection and data collection phases of lease accounting projects. “Although most companies report being on-schedule, we would encourage project leaders to adopt best practices in order to mitigate the risk of delays,” he said. “Appointing an executive sponsor, building a cross-functional project team and scaling resources for data collection will be critical success factors for on-time implementations.” Developed over a period of 10 years by the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB), the new lease accounting standards change the way public companies will report leases in their quarterly and annual financial statements. Many real estate and equipment leases, previously only disclosed in the footnotes of investor filings, will now be capitalised on corporate balance sheets. The implementation deadlines for the new standards start in 2019. However, companies will also be required to provide three years of comparative income statements, beginning on January 1 2017 for calendar year-end filers. Click here to download and read the full report.

Declan Black looks to the future to see what 2017 might bring and imagines two competing scenarios. Scenario one… It's July 2026 and Ireland has just assumed the rotating presidency of the EU. The key issue for the Irish presidency will be negotiating the terms of the application for entry by the United Kingdom of England and Wales. The Liberal party's landslide victory has given it the mandate to bring England and Wales back into the EU where it would join the independent Scotland and a united Ireland as full members. The 2020 separation of Scotland from the UK and the 2021 reunification of Ireland following border polls triggered by the Good Friday Agreement are old memories now. Ireland has warmly greeted a surge in migration from continental Europe, with newcomers attracted by its high-tech, green economy and unrivalled opportunities for rural, community-based-yet-connected community while living in a temperate climate. The new arrivals will further boost the State's finances and improve our ageing demographics. Both the migrants and locals love our modern housing stock that Ireland achieved through an enlightened planning and building programme which ran from 2020 to 2025. A full 40% of workers in Ireland are self-employed, operating by choice as contractors and achieving a blissful work/life balance in revitalised rural towns. New US President Mark Zuckerberg is about to visit to mark the 20 year anniversary of the establishment of Facebook's Irish operations. He will also sign a major series of agreements between the US and EU, underpinning a multilateral and consistent approach to corporate tax and, separately, the use of big data to enhance security by identifying and remediating areas of social deprivation which could give rise to the type of unrest which led to the epidemic of terrorism experienced in the west from 2018 to 2020. Or, scenario two… As Ireland assumes the EU presidency in July 2026, its sole task will be to oversee the final dissolution of the Union. In the UK, Prime Minister Farage has just announced legislation banning migration from Ireland and deporting those who arrived in the last three years, as the exodus from a depressed Ireland has resulted in a wave of anti-Irish sentiment in the UK, exacerbated by renewed violence from nationalist and unionist extremists from Northern Ireland. In Ireland, there is some hope that President Pence will permit a larger than usual quota of Irish migrants to enter the US, anxious to take up manufacturing jobs in the rust belt and happy to pay the 15% special tax on remittances of income to foreign jurisdictions. Ireland's main employer, the National Interest Management Agency (NIMA) is considering a scheme to make the west of Ireland more profitable for farming by taking all the stones out of the fields to build roadside walls. However, it is likely that a series of strikes by the truck drivers employed by NIMA will frustrate this. Meanwhile in Dublin, the short-lived boom caused by the relocation of Russian companies to Ireland attracted by the special 1% tax rate has ended following a directive from President Putin that states such enterprises must now be established in the western Russian province formerly known as Ukraine. The wall around Afghanistan, Syria, Iraq and Iran is 60% complete. It remains to be seen whether the scheme of deducting the cost of building the wall from the permitted oil exports will be effective. Conclusion So which is it to be? As ever, the outcomes are determined by the choices made by people and politicians right now. Will short-term, narrow self-interest prevail over a medium-term, collective approach? We will see in 2026, but the direction will likely be set in 2017. Declan Black is the Managing Partner of the law firm Mason Hayes & Curran. This piece was first published as the introduction to a series of articles by partners in the firm on what 2017 may bring in various legal disciplines.

Corporate governanceIn response to the Green Paper on Corporate Governance Reforms presented by the UK government in November 2016, the Financial Reporting Council (FRC) has issued plans for a change in the country’s corporate governance code. The FRC has proposed reform in what they identify as four key areas, wanting to build upon the unitary board and the ‘comply or explain’ approach. Executive remuneration In the response, the FRC seeks a “much clearer link” between executive remuneration and performance, instead of “rewarding gains from share price movements driven by market factors rather than company performance”. The regulator wants remuneration packages and related reporting to be simplified, requiring boards to make judgements and exercise discretion to ensure that remuneration genuinely reflects business results. Stakeholder interests The FRC also stresses the importance of helping boards take better account of stakeholder views. Currently, there is no requirement for directors to report on how they have promoted the success of the company. The FRC has called for the introduction of a new requirement so boards must "demonstrate how they had regard to wider stakeholders in their key decisions". The FRC supports large private companies being held accountable to their stakeholders because of their “significance to the public interest and the privilege and benefits of limited liability status”. Extending the regulator’s reach In addition, effective enforcement is identified as a key area of reform, stating that the FRC “have powers to investigate and prosecute accountants and actuaries, but not directors”. The change would see the regulator’s reach extended to ensure that disciplinary action can be taken against all directors who have committed financial reporting breaches and associated issues of integrity. Sir Win Bischoff, Chairman of the FRC said, “The Prime Minister has a vision of an economy that, in her words, ‘works for everyone’. “With all this in mind, we will conduct a review of the current UK Corporate Governance Code. This will consider the appropriate balance between the Code’s principles and provisions. In pursuing any changes, the current strengths of UK governance: the unitary board, strong shareholder rights, the role of stewardship and the ‘comply or explain’ approach, must be preserved. We must not throw out the baby with the bathwater.” You can read the full response on the FRC website.

KPMG’s Pulse of Fintech report found that venture capital (VC) funding rose to €12.9 billion in 2016, up from €12.07 billion in the previous year, with a total of 840 deals recorded. Globally, corporate VC investment in fintech rose for the seventh straight year, reaching €8.03 billion in 2016. In Europe, VC funds invested €1.32 billion in fintech firms last year, compared with €1.1 billion in 2015. “Two notable trends in 2016 were collaboration – with fintechs learning to work with major banks – and the rise of China to become a fintech powerhouse, both in investment flow and deal activity,” said KPMG Ireland’s fintech lead, Anna Scally. However, overall investment in the sector declined to €23.3 billion from a peak of €44 billion in 2015. This was driven largely from a fall-off in M&A activity and a limited number of outlier transactions, which were a feature of 2014 and 2015. Outlook for 2017 Insurtech is predicted to continue the strong growth seen in 2016 as the insurance industry catches up with innovations seen in other areas of the finance sector. Growing applications of innovative technologies like wearables and artificial intelligence in the insurance industry are likely to encourage further investment. There is also likely to be increasing participation of tech giants in the fintech sector, the report adds. Given the Payment Service Directive 2 (PSD2) in Europe and the commitment to open banking by other governments and regulators, 2017 is expected to put a global spotlight on fintech that can leverage open banking and API platforms. This spotlight will likely bring increased investor interest in complementary technologies, such as data and analytics. “On the European side we are also likely to see fintechs focus on the opportunities presented by Payments Services Directive which is expected to be a game-changer,” Scally said. You can read the Pulse of Fintech Q4 2016 here.

Businesses are now more worried about possible cyber-attacks and their effect on the business than they are about traditional interruptions auch as supply chain disruptions, data breaches and new laws or regulations, according to a new study. The BCI Horizon Scan Report is based on an annual survey which tracks threats to 726 organisations across industry sectors in 79 countries. This study measures concern over specific threats as reported by business continuity and resilience professionals. For the third straight year, 88% of businesses are reporting that they are ‘concerned’ or ‘extremely concerned’ over possible cyber-attacks. Of the top concern, BCI Executive Director David Thorp said: “Cyber-attacks and data breaches continue to cost organisations billions of dollars annually, a sum that is only likely to go up with the increasing integration of new pieces of technology into daily operations.” Fighting cyber-crime Irish legislation combating cyber-attacks passed committee stage on 22 February as part of a drive across the European Union for strong laws and policing powers to deal with the rising problem. Minister of State at the Department of Justice, David Stanton, said there was a “clear need” for international co-operation and harmonised laws “to counter this threat”. Under the Criminal Justice (Offences Relating to Information Systems) Bill 2016, it is an offence to intentionally access an information system without lawful authority, internally interfere with data or intentionally interrupt its transmission. These offences are punishable by up to 12 years in jail and a possible fine in district court. Other concerns Data breach retains second place in the list of threats with 81% of respondents expressing relatively higher levels of concern. Unplanned IT and telecommunications outages (80%), the top-ranked reason for disruptions to business, remains in third place among threats practitioners are most concerned about. Surprisingly, only 14% of respondents are ‘extremely concerned’ about supply chain disruptions and just 8% fear a business ethics incident. You can read the full BCI Horizon Scan Report here.

Professional accountants are playing a major, positive role in reducing corruption according to a new study published by the International Federation of Accountants (IFAC) entitled The Accountancy Profession: Playing a Positive Role in Tackling Corruption. “Corruption is an economic cancer that disproportionately impacts those least able to absorb its malignancy,” said Fayez Choudhury, IFAC Chief Executive Officer. “This study shows that the accountancy profession - acting in the public interest - is an important part of the cure. “The study confirms that the accountancy profession is a crucial part of strong national governance architectures that confront corruption, in partnership with good government and strong businesses. And vitally, the study shows professional ethics, education, and oversight - at the core of the global accountancy profession - are key to our positive impact in tackling corruption. Meaningful progress will require three things, he added: continued strong cross-sector collaboration; reinvigorated international interest in public financial management; and greater adoption of high-quality international standards on financial reporting, auditing, and ethics. Among the key findings, the study reveals that a higher percentage of accountants in the workforce strongly correlates to better outcomes in Transparency International’s global Corruption Perceptions Index. Examining the profession’s impact in nations with stronger governance structures, the correlation was significantly greater in G-20 countries and member nations of the Financial Action Task Force. And when professional accountancy organisations are present in an economy, having adopted the global profession’s ethical, educational, and investigation and discipline requirements, the positive correlation with Transparency International’s index rises even further. Conducted by the Centre for Economics and Business Research, the study builds on two earlier reports: Nexus 1: The Accountancy Profession, Behind the Numbers and Nexus 2: The Accountancy Profession, A Global Value Add, which examine both the size of the global profession and its economic contribution to the global economy.