By Lee Trevena
This year Inside Retail Live was bigger and better than ever: a three-day event that brought together all the big names and forward-thinking minds in the Australian retail sector.
We heard industry insights about the current retail environment, with highlights including:
- Former Myer CEO Bernie Brooks discussing the struggles of retail to keep up with a rapidly moving world.
- Steve Dennis, former SVP of Neiman Marcus, talking about how to avoid repeating the mistakes of some doomed US retailers.
- An enthralling panel with some of the industry’s top talent debating the future of retail.
But the hot topic for me — and all those involved in property management that we spoke to — was IFRS16.
IFRS16: It’s what everyone should be talking about
You should be aware that significant changes are ahead, thanks to this new accounting standard. Reporting lease liabilities and complying with additional disclosure requirements will be more essential and more complex than ever.
At Inside Retail Live, we had conversations with many people in the retail property management sector. And many of those we spoke to were of a similar mindset:
‘I’ve heard of IFRS16, but I’m not entirely sure how it will affect us or how we should approach assessing those impacts’.
It’s clear that this is a real point of concern and uncertainty.
Outlined below are the three steps you need to take right now to be ready for what’s ahead…
3 next steps to prepare for a seamless transition to IFRS16
1. Discover more about IFRS16 — determine how you’re affected.
‘Are we preparing for this?’
That’s the #1 question you should be asking your CFO and finance team right now. To establish the needs and potential scope for transitioning to IFRS16, you first need to determine if your business is required to adopt the new standards. Listed? Yes, but that’s not all.
IFRS16 will dramatically increase the demands on property and lease management for Tenants, so it’s important that both finance and property managers are across the standards.
2. Comprehensively assess your portfolio
‘Is our lease data complete and accurate?’
As the data capture requirements will increase substantially under IFRS16, if the answer above is ‘no’, then it’s time to get your house in order — or face the reality of being financially non-compliant.
This should involve a complete assessment of the accuracy and scope of your lease data across the portfolio, as well as a process review to ensure that the required data is being captured. Ensure a complete understanding of how your leases are being managed — for most, a complete data audit will be required.
3. Take steps to prepare for the changes to reporting
‘Are we ready for the countdown?’
IFRS16 takes effect on January 1st, 2019. T-minus 9 months and counting. And it will go quickly — that’s why it’s vital to start preparing right now. In fact the majority of businesses are having to make an initial reporting provision from July this year!
Another key way to properly prepare for this new accounting standard is to complete a review of the capacity, capability and efficiency of your current information management systems. What systems are you using, can they deliver what’s needed, and how can they be improved?
Make sure your systems are up to the challenge
With the introduction of more complex lease accounting standards, you need a property management system that’s going to make the transition and ongoing management simple for you.
The fact of the matter is that excel is not going to cut it anymore.
LeaseEagle, as well as being a market-leading property management solution for tenants, now features the LECompliance module. With this module, all lease assumptions can be actively managed and audited, with all balance sheet calculations and future P&L adjustments entirely automated — while always knowing that the source data is complete and accurate.
Essentially, it’s a simple solution to a complex problem.
After the energetic and inspirational discussions at Inside Retail Live 2018, we’re eager to maintain that motivation and conversation by helping businesses prepare for IFRS16.
Give the LeaseEagle team a call today on 1300 887 609 or email email@example.com to talk about how your systems hold up against changes to the industry.