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With the growth of legal regulation, companies are forced to take care of the compatibility of their business management systems with the accounting standards, which include the lease accounting standard – IFRS16, which entered into force at the beginning of 2019. One of the main challenges facing companies is how to implement new requirements having the same number of staff and in the same system.

 

Benefits for the Business

A specialized system developed for IFRS 16 creates six benefits for business.Infographic - Benefits for the Business - no logo for web LP

 

IFRS 16 System Possibilities

The Columbus IFRS 16 system is implemented using 3 standard Microsoft module features: Financial Management – Ledger, Fixed Assets and Purchases and Amounts Payable.

The functions of the listed modules are supplemented with specific solutions required to meet the requirements of IFRS.

  Rules for Calculating the Lease Schedule

  • In the lease schedule, the periodic payment is divided into value coverage and interest expense.

  • The solution supports different payment intervals: the schedule can be monthly, quarterly, semi-annual or annual.

  • Possibility to pay at the beginning of the payment period.

  • Possibility to include an advance as an additional parameter for calculating the schedule.

  • Flexible calculation of the first and last lease payment, based on the actual number of days (relevant if the first and/or last payment covers an incomplete period, such as an incomplete month).

  • Possibility to apply fixed and variable interest rates.

  Management of Lease Contracts' Accounting Operations

  • Long-term liabilities and the acquisition of assets in the contract approval system are recorded in the Ledger and the Fixed Assets module.

  • Reductions in non-current liabilities are recorded according to an approved schedule using flow functions.

  • Automatic calculation and registration of the contract change effect in the Ledger and Fixed Assets module.

  • Automatic calculation and registration of the effect of early termination.

  Lease Transaction Data Management

  • The ability to describe different lease terms at the level of each lease schedule when those schedules belong to the same contract.

  • Possibility to calculate individual lease schedules for individual property units when the lease agreement covers several lease objects (assets).

  Asset Management in the System

  • Asset management in the system is implemented by making maximum use of the standard Microsoft Dynamics NAV Asset Module (settings, functions, reports).

  • For each schedule of the lease, the system automatically creates an asset card, with the option to copy the created asset card to other schedules in the same agreement.

  • Periodic depreciation calculation.

  • Ability to allocate depreciation and interest expense on a pro rata basis according to dimensions using pre-assigned allocation templates.

  Contract Change Management

  • Possibility to change the main parameters of the lease agreement – the amount of the installment, the lease period, interest (discount) rate.
  • Automatic recalculation of the schedule when the contract lease parameters change, saving the historical data of the original contract.
  • Registration and accumulation of historical changes.
  • Automatic recalculation of the schedule when the variable interest rate changes.

  Contract End Process Management

  • Automatic termination of contracts and the possibility to register the transfer of assets after covering long-term liabilities and full depreciation of assets.

  • Early contract termination management.

  Reports and Analytical Tools

  • Standard Microsoft Dynamics NAV reports for analysts by dimensions.

  • Standard Fixed Assets module reports.

Donatas Statulevičius

Donatas Statulevičius

Compliance and Business Continuity Expert

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Customer experience

ATEA

"Created solution is intuitive – user friendly and allows to manage lease contract with minimum efforts".

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Customer experience

Šiaulių Bankas

"Provided calculations and disclosures of new standart to the management of Bank and audit company on time"

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How to adhere to IFRS 16 regulations and build a competitive advantage

Adapting your company's processes to IFRS 16 doesn't require a new business management system or an extra person - it can be done more easily with a specialized IFRS 16 module.

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Benefits of a Specialized IFRS 16 Solution

Contract change management, periodic data transfer and reporting are only a few benefits for the company with a specialized IFRS 16 solution.

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You may find it useful

From 1 January 2019, International Financial Reporting Standard (IFRS 16) requires lessees to account for contractual lease liabilities as non-current liabilities when the lease term is longer than twelve months and the lease price exceeds a specified period. Long-term liabilities under a lease contract are calculated and recorded as the net present value of future cash flows, discounted at the contractual discount rate. The contractual lease price is divided into two components – value coverage, which consistently reduces the registered long-term liabilities, and interest, which are accounted as expenses. All of these calculations can be done in Excel, but companies with a large number of lease contracts understand very well that such calculations in Excel and accounting at the level of each contract will be cumbersome. This requires a flexible solution that specifically meets the requirements of IFRS 16. However, is a truly specialized IFRS 16 solution relevant and applicable only to large companies? Consider the benefits of a solution developed specifically for IFRS 16 that is likely to be relevant to all those accounting for long-term lease liabilities.
Lease agreements get modified all the time; due to a change in the asset or a variation in the lease timeline and price. These modifications are nothing new; however, with the mandate of the latest IFRS 16 Lease, entities following the IFRS standard must adhere to the new accounting practices. The IFRS 16 Lease implementation is one of the most disruptive and complicated changes to the Lease standards ever. According to this, a lessee is required to recognize a Right of Use (RoU) asset to represent its right to use, and a lease liability to represent its obligation to make lease payments. The lease liability is measured at the present value of the lease payments and calculated over the lease term.  
Lietuvių IFRS 16 effective from 1 January 2019 affected all companies with long-term contractual lease obligations recording their accounts in accordance with IFRS.
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