With IFRS 16, the CFO must have full control over all of the company’s lease agreements. The time is about to run out for companies that are not in progress with the preparations for IFRS 16 – the new accounting standard for lease agreements. In most cases, the implementation creates significant business-related, practical and theoretical challenges for the CFO and their colleagues.
When the lease agreements become part of the balance and their processing in the income statement is changed, important financial key figures such as EBITDA, EPS and net debt will also change. This may potentially affect the bank’s loan terms, internal bonus schemes, purchasing decisions and even the ability to pay dividends.
Practical solution for IFRS 16 reporting
In House of Control, we are concerned with the practical implementation for the companies. We have observed following from our own network of customers, auditors, accountants and others:
- Few companies have central, efficient and precise systems and processes in place to meet the new requirements.
- Collecting data on existing leases is a great practical challenge. The process is often manual, time-consuming and not fully accurate, especially because the lease agreements can be found all over the place in the company.
- Most leases are billed based on an invoice from the supplier, and there is usually no good system for registering future obligations and other central data connected to these agreements.
- Many of the ERP system vendors have been late in offering modules that are able to handle the new standard in a good way.
- Therefore, the country’s financial departments struggle with estimates and assessments of existing lease agreements.
We have good news for all these worries: House of Control has launched a new module for IFRS 16. The module can be used independently of the company’s ERP/accounting system. It covers all relevant circumstances, such as transitional rules, billing requirements, usage calculations, lease commitments and lease payments.
This is a module that provides the CFO with full control of the company’s lease commitments, giving the CFO effective and precise reports for use in the work of meeting the IFRS 16 requirements.
Want to know more about the new solution? Book a demo here!