Gregory GjiniFor Visma, Europe’s leading provider of business critical software, size brings considerable complexity when consolidating leases on a group level. Here’s how they solve the challenges with efficiency and precision.
During our seventh IFRS 16 webinar in May 2023, our hosts Karl Oscar Rosli and Pål Ilebekk Havneraas were joined by Kathinka Bjørne-Larsen. She is the Head of Group Accounting and IFRS at Visma.
The Visma family consists of 170 business units in Europe and Latin America, with combined sales of EUR 2,150 million.
Prior to joining Visma in 2022, Kathinka held an IFRS advisory position at the Norwegian bank DNB, and she has seven years of audit experience at the Big Four firm Deloitte.
Size makes consolidation more complicated
During the webinar, they discussed how IFRS 16 leases are treated on a group level in Visma. It starts with monthly financial statements, Kathinka said:
“Monthly financial reporting is done by all of our 170 business units. The group finance team is responsible for consolidated reporting, including IFRS 16 leases. Our portfolio companies use a variety of Visma solutions for reporting, but all of them use Complete Control for contracts and IFRS 16 leases.”
Kathinka’s team has dedicated members that provide the necessary technical guidance for controllers working in the various business units. However, the responsibilities regarding lease and contract management lies with the business unit. The group consolidation ensures IFRS 16 compliance.
A high number of complex calculations
“IFRS 16 is a complex standard. For each contract a company has, you need to identify if it is a lease according to the standard. Then you need to know the commencement date, the lease term, whether or not you have any options, and you need to set the discount rate – and more. That’s a lot of information when multiplied with 170 business units,” Kathinka explained.
These data are then used for calculating the net present value of the lease liability. Kathinka says that using Excel for this was never an option:
“You also need to calculate the right-of-use for each asset, and then comes the information needed for disclosures. For a company our size, using a solution like Complete Control is really the key to succeed. It’s simply more efficient and more precise.”
Correct input for correct output
Automated consolidation and calculations come with their own challenges.
“The key is to ensure correct input into the system. Local responsibility is important to achieve correct input. Because, those closest to the contract are the ones with the best knowledge of it. In addition to this, the group finance team double-checks the information provided by the business units.”
For various reasons, Kathinka and her team frequently perform reassessments of a lease. It may be due to a change in the discount rate, a modification of the lease, changes in the scope of the lease, or other factors.
“Since our responsibility is to ensure IFRS 16 compliance, we do several controls on top of the information provided by the business units. With correct input we will get the correct output. The available API enables us to get the data through a data warehouse that we have integrated with our financial reporting system.”
The quality and speed of IFRS 16 management is further strengthened by giving Visma’s auditors reader access to the Complete Control Solution. This way they can do their own calculations based on the same data, making the audit more efficient.
Business unit: Easy to manage lease data
Pål Havneraas represents one of the portfolio companies that is consolidated into Visma’s group reporting.
“Since we were acquired by Visma in November 2022, we have been reporting monthly to Visma Group. This reporting includes profit & loss, balance sheet, cash flow, notes for the financial statements, and lease accounting and IFRS 16 reporting.”
“We can easily update lease data in the Visma’s Complete Control database. And it is just as easy to enter new contracts, change prices, change the discount rate, and more. We see that the decentralization of responsibility is a very efficient way of reporting,” Pål said.
The IFRS 16 process important when onboarding new companies
House of Control was one out of 40 companies acquired by Visma in 2022. Kathinka says that getting IFRS 16 right from the beginning is an important step when onboarding new companies:
“We set up a meeting between the acquired company and our super user, who will ensure that contract data is input correctly the first time. Correct input yields the right output. For example, when you acquire a company the IFRS 16 liability will be the remaining payments. All of this can be specified in Complete Control, which is really great.” She says that this works equally well the opposite way around, when Visma divests businesses
Watch the webinar on-demand
If you missed the webinar, you can sign up and watch the on-demand version here: