The challenges of AASB 16/IFRS 16
For most large private and public enterprises, adopting the new AASB 16/IFRS 16 lease accounting standards is proving a real challenge.
Not only can transitioning from operating leases to finance leases have a significant impact on the financial reporting numbers but complying with the new standards alone can mean a great amount of work internally.
However, before considering the numbers and the amount of additional work required the single greatest challenge being faced by the majority of these businesses is accessing the increased level of data required to even perform the reporting calculations.
For many multi-site tenants, given its very nature, real estate is also proving to be the area of greatest materiality and complexity. Where once a simple current rent would suffice, organisations now need to be constantly tracking a complete and accurate forecast of all future real estate lease commitments, including possible options. Typically not manageable via a spread sheet, businesses have commonly realised that they simply do not have easy access to the newly required source data, let alone an auditable system for storing and managing it, without utilising IFRS 16 software.
Being ready for AASB 16/IFRS 16 requires: