IFRS16 – Where do you go from today?
The arrival of the new lease accounting standard IFRS16 has been well and truly heralded. What’s less well known are the processes that Lease Managers will need to follow after the initial day one transition to the standard.
Decisions made by lease managers will now significantly impact their company’s balance sheets. This places a larger focus on the need for strong lease governance within organisations and creates further responsibilities for those managing the standard, both within the property and finance teams.
What do I need to do?
What will it take to be operationally proficient in managing your obligations under IFRS16 from 2019 onward?
The major challenge you may tackle will lie in retaining, sourcing, managing and analysing current leasing data within your organisation. Every decision that changes your organisation’s reporting under the standard will now need to be tracked to meet audit requirements.
Assumptions around the minimum expected duration of a lease forms part of this, and these changes will need to be recorded for each lease in an audit trail, existing in parallel to the day to day management of the lease and its structure.
This means that going beyond the first day, having a lease governance framework within your lease management system will be of fundamental importance. Guardian’s Portfolio Manager provides a record of all key decisions made by lease managers for contracts that can be passed to Audit at year-end.
Transitioning with Guardian Global Systems
Collecting the necessary data in order to be IFRS16 compliant is most likely to be a challenge for many, especially if you don’t have a centralised system to manage all your lease contracts. Most systems don’t fully meet the standards of a modern accounting ready lease management platform. They should provide comprehensive tracking of all structural components of a lease, management and tracking of assets, valuations and all associated records.
Guardian Global Systems’ Portfolio Manager is a lease, contract and asset management system that manages your international real estate and lease asset portfolios, covering all types of leases. The IFRS16 governance framework provided by Portfolio Manager ensures an auditable record is kept of all key decisions made over the life of your leases that impact the valuations of the right-of-use asset or the calculation of implied liabilities. Disclosure is supported by an audit trail each and every time there are amendments to the contract or to the IFRS16 assumptions relating to it.
Integration with various Lease Accounting packages provides you with a stable, secure repository for all contract information including leases that fall within the IFRS16 standard. Our Portfolio Manager system provides a comprehensive set of functionality supporting the day-to-day management of leased assets while meeting the needs of the leasing teams and audit requirements of the office of finance.
Key judgments are recorded in Portfolio Manager under each contract, not just in assessing whether a lease exists, but in identifying the liability term, managing costs, and review structure over the life of each lease agreement. This record of key assumptions forms part of the information that is required by audit and is sent to your lease accounting package as part of what is typically an end-of-month process with minimal impact to the day-to-day running of your portfolio.
To book a demonstration of our system please contact us at email@example.com