IFRS is the new lease accounting standard released by the International Accounting Standards Board (IASB) back in 2016. It came into effect on January 1st, 2019. However, according to the latest reports, many private companies haven’t implemented the new lease accounting standards. It’s perhaps due to the complex nature of it and, also, because many companies are still using excel sheets for accounting purposes. In 2021, lease accounting software can help in complying with IFRS 16 without hassle.
Under IFRS 16, lessees should recognize their assets and liabilities for all short-term rentals and those with lease terms of 12 months or less. There is an exception in cases where the asset value is low. IFRS 16 follows the “right-of-use” model, which demands that if any company has the right to use any asset, in effect, they are renting. Thus, it has to be recorded on the balance sheet.
Additionally, under IFRS 16, lease payments must be considered a lease liability on the balance sheet. Any additional cost must be reported separately from primary lease payments, and the accounts should express any depreciation of assets and interest. Also, it enables lease agreements to be combined to make a portfolio, thus avoiding individual reporting.
How Technology Can Be Used to Achieve IFRS 16 Compliance
A lease accounting software with multiple features promises easy and hassle-free compliance with IFRS 16 in 2021. Find out how your business can benefit from it.
There are many disclosure requirements related to IFRS 16, such as the right-of-use assets, interest expenses for liabilities of the lease and outflow of leases. A lease accounting software will help in easily generating all disclosure reports within minutes, rather than days. Thus, comprehensive reporting is possible by using robust and effective lease accounting software with excellent features.
Reduce Human Errors
Many companies are still reluctant to embrace technology to power their implementation process. The traditional use of excel sheets for lease accounting can be a cumbersome process and will affect the productivity of the team. There are chances of human errors, data errors, which can all lead to unmet deadlines, non-compliance, etc. A lease accounting software can help reduce or eliminate human errors, improve efficiency and reduce costs.
Traditionally, lease management involves a lot of paperwork related to portfolios, contracts and other documents as different departments need this data frequently. A lease accounting and management software can help you centralize this huge amount of data into a single repository, while also streamlining the documentation process.
If the companies stick with manually entered data, there are chances that critical dates will be missed. It can lead to late payments or extra money being spent, as it is almost impossible to remember important dates of expiration, renewal, termination, payments, etc. Using lease accounting software will help you get automated alerts, reminders, and notifications via email or other means. In this way, you will never miss a critical date.
Yardi Corom’s lease accounting software will help your business to comply with the new lease accounting standards of IFRS 16 in 2021. For more details regarding other features of the lease accounting software, visit Yardi Corom.