The International Accounting Standards Board (IASB) issued IFRS 16 for Leases in Jan 2016. It describes the recognition, measurement, presentation and disclosure of leases for both parties to a contract. It replaces the previous standard, IAS 17, and is effective on 1 Jan 2019.
With IAS 17, companies had significant leeway to determine if a lease was an operating lease (off balance sheet) or finance lease. IFRS 16 changes that, and moves most leases on to the balance sheet as a finance lease. The intent is to increase the clarity and consistency of lease reporting. The results will directly impact operating cash flow (including profitability) and balance sheets.
To ensure compliance organizations, should follow four steps:
- Locate all lease contracts – determine how many are operating leases
- Get a clear picture into the lease data, including maintenance, services, renewables, etc.
- Most companies will want to separate and re-paper services going forward
- Put lease information through an analysis to understand the impact
- Work through a comprehensive project plan to implement the needed changes
Seals and its partners can help our customers with IFRS 16 compliance initiatives. Seal can find all lease contracts from across the organization and locate and extract all of the asset, services, payment, and all other pertinent data needed for reporting.
Seal’s partners can also help with program design, extraction policies and playbooks, assess the impact of IFRS 16, and ensure key reporting requirements are met.
Together, Seal and its services partners can lower the cost, speed the time, and minimize the disruption of IFRS 16 compliance.