It’s been over a year and a half since the International Accounting Standards Board (IASB) published IFRS 16 - Leases, which outlined new guidelines for lease accounting. IFRS 16 will remove the distinction between finance and operating leases. One of the biggest tasks facing organisations is creating finance lease information and associated asset records from existing operating lease data.
Real Asset Management’s lease accounting module has been enhanced to make the aforementioned task far simpler. Our talented developers have created a transition wizard that will take existing operating lease records, work a little bit of magic and create corresponding finance leases and associated assets from the data provided.
Such a wizard will be imperative in the process of becoming IFRS 16 compliant. It can be utilised with either a Full or Partial Retrospective method and users can keep a record of the original operating lease, allowing them to produce comparison reports to analyse the impact on the balance sheet and depreciation costs. Without such a tool, the task of importing finance lease information and related asset records manually will consume a massive amount of time and resources.
Aside from a spellbinding wizard, here are a few other things you should demand from your lease accounting software
You should be able to specify interest rates in order to calculate Present Value and the Net Present Value (NPV) for your lease arrangements. The NPV is used to determine the fair value of a leased asset, which will be important when it comes to IFRS 16 compliance and reporting leases on the balance sheet.
Extensive reports should be included within your lease accounting software package. Automatically producing details about obligations due next year, between years 2-5 and 5 years onwards will save a lot of time and allow users to focus on other tasks.
A truly comprehensive package should feature an integrated fixed asset register that enables the simple inclusion of leased assets on the balance sheet. If your lease accounting solution does not allow you to produce crucial reports easily, you will be faced with the onerous task of manually collating and amending figures.
With just over a year left until IFRS 16 takes effect, now is the time to start updating your lease management processes! The first step will be to select a solution that will ease your transition to compliance.
If you are interested in further information on our lease accounting solution, our friendly team will be happy to help.