By Bruno Leblanc, EMEA Managing Director Planning, Sigma Conso
Implementation of IFRS 16 is compulsory as of 1 January 2019.
What is the best way to get prepared? You can anticipate the implementation of the new standard in your group by asking the right questions today (read our article IFRS 16 implementation: Are you ready?)
Given that the implementation of the standard requires inventorying, recording, updating, centralising and processing lease contracts, a reliable software solution will be very helpful.
What is the best solution to ensure IFRS 16 conformity?
The ideal solution must meet the following eight requirements:
- Easy management without performance or storage concerns for potentially very significant transaction volumes
- The ability to process text and figures and to record attachments
- The ability to add comments to easily understand the nature of contracts and their purpose
- The ability to perform complex calculations for lease contracts: asset and depreciation calculations, fictitious loan recalculations, etc.
- A workflow system to track the progress of work at all levels of the organisation and of all involved
- The ability to generate financial calculations to simulate fictitious loans, calculate interest, depreciation of new assets, etc.
- Interfaces for data acquisition from various source systems (the contract database, ERPs, data warehouses, etc.) and with output data to automatically feed the consolidation
- The ability to run simulations to measure the impact of the most significant contracts.
The last point on running simulations is very important. This functionality will enable you to take the right decisions about the definitive financing methods you should select. In this respect, the requirements for the IFRS 16 standard go well beyond simple simulations of potential loans, assets to be entered, depreciation and loan annuities. The impact on the financial statements (income statement, balance sheet and cash flow) can be significant and must be part of a strategy.
In addition, simulations will open prospects in terms of the choice of investments, financing, tax impacts, etc. All of these elements can become decisive in the investment and financing strategy of your group.
In summary, the solution you choose will have to be able to manage transactional items, perform calculations (notably financial ones), provide controls at the different steps of the process, manage high volumes, manage documents, etc.
Reporting and planning applications, which are increasingly used by Finance Departments, meet these criteria: they integrate financial intelligence functionality and already offer extensive options to ensure conformity with IFRS 16 quickly and less expensively.
At Sigma Conso, we’ve developed an IFRS 16 kit in our reporting and planning application which enables you to easily manage your lease contracts and intuitively carry out all of the tasks required, including financial calculations, documentation, workflow, and item tracking from the most detailed level (the transaction) through consolidation entry. The IFRS 16 kit provides a documentation base for your consolidated entries which is automatically linked to your consolidation software, regardless of the one you use.
In addition, the Business Intelligence functionality of the tool ensures easy translation of your data into graphs, which will facilitate internal and external communication.
Don’t wait any longer to anticipate this processing.
Even creating an inventory of all of the contracts in your subsidiaries can be problematic. Failing to anticipate the impacts or the information to be provided now could be dangerous.