CFOs, pay attention: IFRS16 compliance is not that difficult
The new leasing standard IFRS16 requires some drastic changes. The financial administration of leasing contracts has to be changed because all these contracts must now be reflected in the balance sheet in the annual report. A reason to start panicking? Not at all, because it doesn’t have to be that hard. In this blog I explain why.
The date is fixed. IFRS16 will be mandatory from 1 January 2019 for listed companies that have rental or leasing obligations. This new leasing standard mainly concerns real estate, but also, for example, vehicle fleets, inventories, and yes, even the photocopier. The goal of this legal obligation is to achieve greater transparency. That means quite a lot for a company that has many complicated leasing contracts. A lengthy and complex IFRS16 implementation trajectory seems to be the only solution. And yet that is not true, and this is why:
1: SAP RE-FX ensures fast compliance
There is no need for the IFRS16 implementation to be difficult. If you are already a SAP user, you are already in the starting blocks. And when you use or start using the SAP RE-FX module [doorlinken naar productpagina – tekst volgt], you’ll hear the starting gun and be sprinting to the finish line with ease as if you were Usain Bolt! SAP RE-FX was originally a tool that was created to put real estate administration in order. But with the IFRS16 add-on, the module changes into a tool that enables you to manage and update all of your leasing contracts without having to set up the entire SAP RE-FX module. That saves both time and costs.
2: The IFRS16 add-on is fully integrated
The IFRS16 add-on forms a complete part of your SAP landscape. This makes managing and adjusting your leasing contracts a simple job. With a press of a button, you can adjust the rental price or the term and this will then be adjusted in real-time for the coming years. That is a completely different way of working than when you work with an Excel sheet in which you have to process everything manually, sometimes for dozens of contracts.
3: A great opportunity to achieve proper contract administration
Does your company have an extensive leasing portfolio? In that case IFRS16 will have greater consequences for your organisation than for a company with a smaller portfolio. But the new leasing standard also offers new opportunities. Because, wouldn’t it be nice to have insight into all of the contracts of the entire company? IFRS16 offers an excellent opportunity to organize and automate your contract administration. In addition to leasing contracts, you can also enter all of your other contracts in the IFRS16 add-on. In that way, you’ll always be able to act in time when, for example, options are cancelled or current contracts are reconsidered.
IFRS16: keep it small
There is no need for IFRS16 to be difficult. If you keep the implementation with SAP RE-FX within limits, you’ll be compliant within no time. In this way, you take away any possible worries you may have and even create opportunities to set up the contract administration for your entire company.
Check the recorded webinar 'How to become IFRS16 compliant quickly and simply' of Thursday 30 August 2018.