Expert insights from Karl Oscar Rosli, Lease Accounting Expert & Head of Product Marketing Management, House of Control
IFRS 16 may be part of everyday finance operations, but in many companies the process is still held together by a small number of people who know the model, remember the decisions and understand where the documentation is stored. That can work for a while. It becomes a risk when someone leaves, changes roles, goes on holiday, or when the business grows.
In this article, Karl Oscar Rosli shares what he has seen from five years of working closely with House of Control’s customers on lease accounting and contract management.
For many finance teams, IFRS 16 started as an implementation project. The first priority was to become compliant: identify leases, calculate lease liabilities, recognise right-of-use assets and prepare reporting. In that phase, it was natural that a small group of specialists built the process.
The challenge usually appears later. New leases are signed. Contracts are modified. Index adjustments are applied. Entities are added. Auditors ask new questions. The business changes, but the original process may still rely on the person who built it.
“Many finance teams have someone who knows the process inside out,” says Karl Oscar.
“They know why a lease term was assessed the way it was, how the discount rate was selected, where the latest file is stored and what the auditor asked about last year. That knowledge is valuable. But when it is not written down or shared, the process is more fragile than many leaders realise.”
One recurring pattern in customer dialogues is that the accounting output may look correct, while the history behind it is harder to explain. The team can produce journal entries, reconciliations and disclosure inputs. But when someone asks why a key assumption was made, the supporting evidence is not always easy to find.
“When documentation is spread across emails, spreadsheets and individual memory, the team spends too much time reconstructing decisions instead of reviewing what actually changed,” says Karl Oscar.
That creates pressure during close, year-end and audit. Weak documentation can make an otherwise accurate process feel unreliable, because the evidence is difficult to locate when it matters most.
Read more: AI in IFRS 16 lease accounting: Why control must come before automation.
Key person risk often concentrates in the parts of IFRS 16 that require judgement, handovers or manual updates.
These are the areas where contract facts, accounting treatment and reporting deadlines meet:
These dependencies can exist even in otherwise mature finance teams. Lease accounting often sits between finance, procurement, legal, operations and real estate. If responsibilities are unclear, one person can become the informal bridge between all parties.
Mature teams do not try to remove judgement from IFRS 16. They make the judgement easier to understand, review and hand over.
“IFRS 16 will always involve professional judgement,” says Karl Oscar.
“The risk comes when those judgements live in someone’s head, in a spreadsheet comment or in an old email. A mature process makes the reasoning visible, so the team can explain what was decided, why it was decided and who reviewed it.”
Four practical ways to reduce IFRS 16 key person risk
1. Clarify ownership.
Define who prepares, reviews, approves and provides input for key steps such as lease onboarding, reassessments, rate updates, postings and disclosure preparation.
2. Document key judgements.
Lease term, extension options, discount rates and material modifications should have a short decision record. The aim is to make important reasoning visible to auditors, managers and new team members.
3. Create a repeatable close process.
Month-end and year-end should not depend on memory. Use a close playbook with timelines, journal templates, reconciliation steps, open issues and links to supporting evidence.
4. Move critical data out of isolated spreadsheets.
Spreadsheets can be useful, but they become risky when they act as the only system of record. Fit-for-purpose lease accounting software can improve traceability, consistency, access control and audit readiness.
Karl Oscar has worked with customers that have strong technical knowledge, but still need to make the process easier for others to understand.
“A good IFRS 16 process should be clear enough for another qualified person to step in, follow the logic and understand the history. That allows the team to benefit from specialist expertise without making the whole process depend on one person,” says Karl Oscar.
That matters for CFOs and group reporting teams. IFRS 16 can influence management reporting, forecasts and covenant discussions, depending on the definitions and metrics a company uses. If the process is fragile, the reporting impact can become harder to explain at exactly the wrong time.
A simple way to assess key person risk is to ask: could someone else answer the auditor’s questions without starting from scratch?
If evidence lives in personal folders or ad-hoc explanations, the process is vulnerable. If lease data, calculation history, assumptions, approvals and reconciliations are stored centrally, audit requests become easier to handle. The team can show not only the result, but also how the result was produced and reviewed.
“Specialists will always be important,” says Karl Oscar.
“But a strong IFRS 16 process should not depend on one person being available at the right time. The knowledge needs to be visible enough for the team to trust it, review it and carry it forward.”
Read more: IFRS 16 lease accounting in 2026: From compliance task to controlled process.
Karl Oscar Rosli works as Lease Accounting Expert and Head of Product Marketing Management at House of Control. For the last five years, he has worked closely with customers to help them succeed with lease accounting and contract management. His work gives him first-hand insight into the practical challenges finance teams face when lease accounting processes depend on individual knowledge, manual routines and fragmented contract data.
It is the risk that critical lease accounting knowledge, process steps and historical decisions depend on one or two individuals instead of a documented and repeatable control process.
Lease accounting includes judgement, contract interpretation, calculations, postings and audit evidence. If these elements are not documented, reporting can become delayed or difficult to explain when key people are unavailable.
They can clarify ownership, document key assumptions, create repeatable close routines, cross-train team members and use systems that centralise lease data, calculation history and audit evidence.
A mature process is documented, reviewable and scalable. It allows finance teams to explain assumptions, track changes and respond to audit or management questions with confidence.
For finance leaders, reducing IFRS 16 key person risk means stronger continuity, fewer audit surprises and a lease accounting process that can grow with the business.