The road to IFRS 16 implementation is long and complex. Almost all companies that use leases will need to change their reporting system to become compliant with the new standard. We have compiled these easy steps for implementation of a IFRS 16 reporting system.
While many companies have started upgrading their systems and processes there are still many others wondering how to get started. The task requires significant resource allocation and planning.
If you haven’t started your system upgrade yet you’re not alone. The latest survey from KPMG reports that overall, just 3% of companies have fully completed their lease accounting compliance projects. Of the remainder, over two-thirds, 67%, indicated that they were not on track to implement the new rules which become effective from 1 January 2019.
The new lease accounting standard is making companies re-engineer the way they manage and report on lease agreements for compliance and ongoing lease management and the impact of the new rules extend far beyond just the accounting function. Executives from IT, Treasury, Tax and Investor Relations need to be involved in the change solution.
The System Change Challenge
Implementing a new system takes time and can often be much longer than originally anticipated. The KPMG report ‘Global Lease Accounting Survey – Lease Accounting is here: Are you ready?’ examined the key challenges businesses were and may still be facing when implementing the new standards. Figures show that only 13% of global companies believe they can implement the required system changes in three months or less. 42% of organisations expect system changes to take four-six months, while one in ten think it could take as much as a year.
Finance directors need to consider all solutions capable of dealing with the new lease accounting requirements and it is important to try and get it right the first time to minimise the costs. Globally costs are rising on IFRS 16 implementation programmes as companies choose inadequate solutions. Using the right technology and future proofing the business should take priority over costs. Best in class companies are making the most of this review opportunity and improving their operational reporting as well as delivering compliance.
Figures reveal that companies plan to use a wide range of software solutions:
Easy Steps to IFRS 16 Implementation OR a Pragmatic Approach to IFRS 16
In this guide we examine the stages required for a smooth transition to IFRS 16 standards.
First establish a programme management team to steer the project.
- Assess the impact / quantify the changes. Review all your lease contracts and assess if your current systems and processes capturing all the required information necessary to apply IFRS 16, including disclosures.
- Data preparation – gather and validate lease data and set discount rates / inflation rates.
- Quantify the changes and identify any opportunities for better lease / operational reporting
- Select and implement solution
- Prepare full IFRS 16 compliant disclosure
- Automate and establish processes for business as usual
The CCH Tagetik Solution
The CCH Tagetik solution for IFRS 16 is a financial and regulatory reporting tool that has been adapted for lease management. Over 200 global organisations already use our software. It can be fully integrated with an existing reporting and management information system and provides a good level of functionality from a finance perspective, automation of data; controls and validations; auditability of lease and finance balance level information; work flow and process management; whilst still providing lease management information the required IFRS 16 output.
Out of all the software solutions available in the market CCH Tagetik is the lowest risk and delivers most value, it also gives your company the best of both worlds, a rich heritage and background now delivered in new age technology.
CCH Tagetik Project / Implementation:
- Our dedicated experts can undertake a quick IFRS 16 impact assessment within days. Our solution allows you to load leases and understand IFRS impact on the profit and loss and balance sheet. It can simulate different transition methods, discount rates. Unlike many of our competitors, CCH Tagetik software can manage change quickly. This is because CCH Tagetik’ is based on one platform with much more built-in functionality for consolidation, reporting and disclosure.
- The solution can be up and running in weeks. It provides a future proof solution and a tool that can be managed by finance. CCH Tagetik provides the same solution for on-premise and cloud. So, no rebuild or migration of an application is needed when moving from on-premise to the cloud, which is required with other solutions.
- CCH Tagetik promotes control and collaboration with built-in work flow, communication tools, and an audit trail. Manage financial and non-financial data. Set up an operating process on an ongoing basis and align finance and operations. Enables you to expand your insights by exploring financial and operational results across unlimited dimensions.
- Give you the ability to automate where possible – data integration, monthly lease rollover and updates, alerts on expiring leases etc. With CCH Finance Transformation Platform you can go beyond consolidation. Extend your CCH Tagetik investment to streamline all your financial processes including budgeting and planning, reporting and disclosure, profitability analysis and regulatory requirements. CCH Tagetik not only meets all the five pillars of Financial Close (Reconciliation, Data loading, Consolidation, Reporting and Adjustments, Disclosure) in one single solution but also addresses FP&A needs for finance and operations in one single application.
- Support services available of ongoing management and continuous innovation. CCH Tagetik was the first software vendor to go to market (in 2007) with a unified solution for enterprise performance management (EPM) processes, with built-in functionality and all your data in a single application. Since then, we have continued to innovate and add new functionality based on customer feedback and market developments.
- Get ready for the future. CCH Tagetik sets a foundation for artificial intelligence, machine learning, and predictive analytics.
Any company looking for a planning and consolidation solution that is fully compliant with IFRS 16 should fully investigate the CCH Tagetik’s long-term product innovation strategy and scrutinise our ability to evolve both our product and service proposition in a fast moving industry. Established vendors, like CCH Tagetik with our long history of leading the market, should be on your selection shortlist.
Our expert team can help you prepare for the changes that will take place with IFRS 16. We can also provide advice and guidance on any aspects of IFRS 16 that may be of particular concern. We want you to be confident you are taking all the necessary steps and that your business is ready for IFRS 16 and maximising your CCH Tagetik investment.
About CCH Tagetik
CCH Tagetik is a financial and regulatory reporting tool that has been adapted for lease management. Over 200 global organisations already use the CCH Tagetik solution. It empowers decision makers and business users across all departments, helping them work smarter, streamline business collaboration, and make insight-based decisions with confidence.
Established in 1836 – 1 Product, with 4 global divisions serving more than 1200 customers in over 180 countries.