As we moved towards the 1st Jan 19 deadline, more organisations were considering their options: in-house Excel models, lease management solutions with IFRS 16 bolt-on and IFRS 16 software.
What are the differences in these tools and the impact of using them?
Excel provides ultimate flexibility but doesn’t naturally lend itself to manage and control a new lease reporting process. It can give the right answer if developed correctly – but is prone to all the normal excel risks and constraints.
However – this doesn’t mean Excel is not the right tool. If you have relatively few low value leases that do not change frequently then this will be fine. However note… you will rely on the person who developed the model so make sure its documented, and have a back-up person.
Lease management specialists with IFRS 16 bolt-on
If you have lease management systems, then the likelihood is that you numerous leases that change frequently.
Bolt-ons with Lease management providers will be appropriate where you have similar leases and materiality is not too high. There is less need for analysis and auditability.
As we can appreciate, IFRS 16 for some organisations will have a significant impact on financial statements and resulting performance KPIs – this will be an overnight change for many organisations…and what comes with that is scrutiny and an ability to answer questions on the new ROU asset composition and related new postings under IFRS.
When requirements are relatively simple, bolt-ons to lease management systems could be an option. The benefits are that you have existing relationships with software vendors, you don’t have a significant impact and so the system needs to just deliver IFRS postings – there’s no point in employing a sledgehammer to crack a nut.
Key points to consider are the audit and transparency requirements that may be required. Software providers tend to have expertise in their main area of operation – lease management systems will help you manage leases and decisions around this – IFRS reporting is a slightly different requirement. So be sure to understand your commitments in terms of controls and transparency.
Finance IFRS 16 software
IFRS 16 is a financial reporting standard – and finance solutions are typically more appropriate to deliver this.
Specialist finance software provides full transparency and ease of reporting which is important on IFRS 16 projects. They also automate data – which is the next most important thing,
These sorts of solution also normally provide:
- Workflow – management and audit of the process – who does what and when they do it. This helps govern the process and push responsibility to the data owners.
- Controls – from security and data access, segregation of duties and data validations to improve accuracy
- Financial intelligence – these systems already generate journals and have calculation rules to help produce the correct IFRS 16 postings
- Integration – finance software integrates with GL systems – its part of their job. So this technology can be used to integrate with Lease systems and GLs.
If you have numerous leases and global operations , then IFRS software will be the best fit.
Watch the video below for a quick overview of the CCH Tagetik IFRS 16 solution – Finance Software with IFRS 16 capability.
Learn more about finance solutions integrating IFRS 16 and why AIS Consulting is a trusted delivery partner.