Beat the lease accounting deadline

IFRS 16 requirements for lease accounting go into effect on January 1, 2019 – a little more than a year from today. Any company with leases or subleases valued at more than $5,000 with terms of 12 months or longer is affected. While a year may seem like plenty of time to prepare for the new accounting standards, time is actually running short.

We are definitely seeing a tendency to vastly underestimate the amount of preparation work needed for compliance. Based on our experiences in working with companies such as Randstad and Ambea, my team and I are strongly advising the finance leaders we speak with to start preparation now.


IFRS 16 Lease Accounting

Following are some of the challenges we’ve observed and have helped to resolve with the implementation of CCH Tagetik’s Lease Accounting Solution:

  • Many finance teams do not have a clear idea about the number of lease and service agreements that exist, since most companies do not have a central repository for storing and tracking such agreements. When this is the case, lease agreements have to be tracked down, department by department, business unit by business unit. We find it is very common for finance teams to discover many leasing and service agreements that were not known to them. 
  • Most likely, lease-related information must be pulled from multiple source systems. The amount and type of information available usually varies widely. Key information may be missing for some leases, adding more detective work.
  • Each lease must be verified, evaluated, and documented. For those companies with many leases, this can represent weeks of work added to the already heavy workload of most finance teams.
  • Consideration must be given to how lease data is stored and continually managed and maintained. Lease-related processes likely will require revamping, since lease data must be current and consistent at all times.

We find that when finance teams recognize the amount of preparation that must be done in advance of implementing a technical solution for IFRS 16, their solution requirements often change. They realize that in addition to the calculation and reporting functionality needed for technical compliance, they also need a centralized repository for storing lease data and managing changes affecting calculations; automatic integration with multiple source systems; modeling capabilities to assess and predict impact on financial statements; and workflow management and tracking capabilities.

If your company is one of the thousands that will be affected by IFRS 16 – or by its U.S. counterpart ASC 842 – and you’re still determining how best to approach this new standard, we invite you to check out the following resources on our website:

If you are interested in Customer Stories don’t miss the recent news release highlighting our work with Randstad, which has more than 14,000 property and auto lease contracts.

IFRS 16 Lease Accounting

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