International Financial Reporting Standards (IFRS) are changing. From 1 January 2019, IFRS 16, will impact on the way leases are accounted for by lessees in terms of recognition, measurement, presentation and disclosure.
This is where BDO Lead can help – a streamlined and efficient lease management and IFRS 16 technology solution.
BDO Lead helps you transfer existing data, supplemented by additional parameters necessary for accounting (under IFRS 16), to a single database. Features include:
- Ability to manage thousands of leases where data is entered into a spreadsheet and BDO Lead takes care of the calculations
- Recognising the transitional effects and ongoing impacts on KPIs and relevant disclosure requirements
- Importing existing lease contract data via an import interface
- Guiding the user through the complexity of the standard and providing the final journal entry for existing and new lease contracts
- Ensuring that the history of data inputs can be retrieved at any time and in contrast to a spreadsheet program, unintentional overwriting of information is not possible.
BDO Lead has a great track record and has been successfully implemented by organisations including Aldi Supermarkets and Deutsche Telekom.
Current challenges for multiple lease holders
|Businesses need to:
- Estimate the effects of IFRS 16 on their key performance indicators, i.e. EBITDA, profit before tax, net current assets, debt/equity ratio, interest cover ratio
- Consider the potential impact on their bank covenants
- Estimate the effects of IFRS 16 on their financial statements
- Reassess and manage their existing and future lease portfolio
- Assess whether to exercise renewal and / or termination options.
|Businesses need to have a full understanding of:
- The classification of lease contracts
- What the journals will be on date of initial application
- What the ongoing journal entries will be
- The effects on their financial statements.
|Businesses need to consider:
- If existing processes are sufficient for new requirements
- If processes are clear and transparent
- Levels of automation vs manual input
- If the IT landscape is too complex for manual calculation
- Levels of personnel resources to ensure successful implementation.
|Businesses need to:
- Review levels of personnel to avoid a ‘bottleneck’ in the process of implementing IFRS 16
- Review tools and processes to ensure they are robust and able to withstand human error (data easily backed up, calculations automated, inputs date and time stamped).
BDO LEAD gives users the opportunity to save leases under review in a central database and the ability to analyse all leases based on criteria. Information can also be tailored to fit with your requirements.
BDO LEAD allows you to manage leases on a quantitative basis. Once the lease payments have been entered, BDO Lead calculates the present value of the lease payments and the amount of the lease liability, including the right-of-use asset. There are also options to track changes and reassess leases. BDO Lead also calculate the interest expense and depreciation for the period.
Information stored in the database can be used to analyse leases. The basic version of BDO Lead comprises analysis tools that be tailored to the user and sector. This includes:
- General analysis / queries
- Disclosures in the notes required by IFRS 16.
As a web-based portal, BDO Lead allows users to input their lease information (when it starts, the monthly payment, end date and borrowing rate), and will:
- Calculate the interest expense for the period
- Calculate the depreciation for the period
- Calculate the right-of-use asset and lease liability at the end of the period
- Take care of the presentation in the financial statements.
Created by both IFRS experts and software developers, BDO Lead takes into account transitioning and ongoing maintenance of leases.
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