“There are a lot of ‘IFRS smiles’ out there,” says HoC’s IFRS Officer

by House of Control | Sep 14, 2020 11:43:42 PM

In accounting departments throughout the Nordic region, the mood is positive when they see how using good tools makes working with IFRS 16 accurate, quick and easy. Our colleague Kathrine Resch-Knudsen has visited many of them, and can testify to rapidly falling stress levels.

When you talk to listed companies and others who apply IFRSs, how far have they typically got in their preparations for IFRS 16?

With hundreds of listed companies in the Nordic region, clearly there is a great deal of variation in how they are getting on. Some are still collating and gaining an overview of the number of leases from all their branch offices and subsidiaries around the world. Others, though, have already reported to their owners the effect this will have on the balance sheet. Companies who were already using our solution have identified and registered the leases in their system, and all that is left to be done is the IFRS 16 classification.

It looks like IFRS 16 could entail a lot of extra work for CFOs, controllers and accounts departments. What are you finding, out in the real world?

That’s quite an interesting question, because the mood actually seems to be pretty upbeat. In any case, I’ve had nothing but positive feedback when I’ve been out visiting clients and had a start-up meeting with our solution.

I find that one important reason for this positive mood is that the CFO and the accounts department have agreed on which system supplier to use.

During the start-up process with House of Control, we recommend workshops, where we enter the leases together. At this point we identify various issues that must be discussed with the auditors. These meetings are very friendly and informal, and – yes – the mood is positive and relaxed.

To what extent do the accounts department have central control over the leases covered by the new regulations?

That depends entirely on how the companies are structured. In some companies, the leases are located at the various branch offices and in the other countries. In others, the biggest and most important leases are administered centrally. Some prefer for the various branch offices to enter the leases and perform the IFRS 16 classification, whereas others centralise this task at the accounts department for the Nordic region.

What do CFOs think of the functionality in House of Control’s IFRS 16 module?

I get the impression that everyone who works with the IFRS 16 module finds it straightforward and user-friendly. Those who have not previously used our better-known solution, Complete Control, are also surprised by how much more they can get out of the solution than they originally imagined.

Finally, there are various transitional rules and calculation methods. Have you gained an impression of what is most common in Norway?

The modified retrospective approach is by far the most widely used. There is also the option to decide on a lease-by-lease basis whether to recognise the right of use at the value recognised in the balance sheet, as if IFRS 16 had been implemented when the lease was signed, or at the same value as the lease obligation at the date of transition. I have found that many people want to simulate the effects of the two alternatives, which our solution allows them to do.

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