Nowadays there is a lot of information about a new accounting standard for leases – IFRS 16 released by the IASB (International Accounting Standards Board), and ASC 842 by the FASB (Financial Accounting Standards Board). You can find many useful illustrative examples and tutorials, which explain the concept well. Although the practical implementation of the IFRS 16 standard still leaves some questions unanswered, once new the lease standard requirements are clear, your “practical” topics will be:
Once you figure out how your lease accounting will be setup under the new rules, your further questions may be:
To make the right decisions, at some point in time, you may need to play with your lease figures and model your accounting transactions to see the impact on your balance sheet – as the essence of IFRS 16 is a requirement to disclose the operating lease liability on the balance sheet, together with the Right-of-use asset. In order to do that, you will need a “sand box” tool to perform your calculations. This practical exercise will give you a better insight into the coming changes from two perspectives– changes in accounting and changes in your software.
Here, I’ll share my excel based IFRS 16 calculator with you. Feel free to use it as your “sand box”. Have a go at trying it out and if you have any questions, contact us by email at: firstname.lastname@example.org.
This IFRS 16 Calculator was tested against calculation samples published by well-known consultancy companies (Deloitte, PWC, Ernst & Young) then we used it in testing our comprehensive lease accounting software package.
For businesses who have just a handful of operating leases – the excel calculator and manual journal postings may work well. Those who have hundreds of leases, or have complex lease agreements (e.g. variable leases, leases in foreign currency), should consider a transactional system.