Soft4Lessee is a software tool for lease accounting under IFRS 16 standard and US GAAP (ASC 842).
Businesses with large portfolios of operating leases will be impacted by the change in accounting standards, as the new standards require lessees to recognize assets and liabilities arising from operating leases on the balance sheet.
Soft4Lessee will help your business to:
- Plan the transition to the IFRS 16 / ASC 842 standard – calculate the impact and choose one of the transition options;
- Stay compliant with the standard – upload new leases every month, let the system calculate values and download G/L transactions.
Soft4Lessee Main Features
Lease Agreement Data Management
In Soft4Lessee, you have a database of your lease agreements, with three major statuses – new agreements under consideration, active leases, and archived leases (expired, or terminated early). Active leases can be amended, and the system keeps an audit trail of all changes made.
Lease Unit Master Records (equipment being leased)
You can have one or multiple (unlimited) units on lease agreement, with cost price, residual value, and a unique ID for each unit.
In Soft4Lessee you have a database of lessors, with contact details and a lease portfolio for each lessor.
Keep Track of Lease Status
In addition to major lease statuses (under consideration, active, archived) the system gives you the option to track leases by more detailed statuses – requested, quoted, signed or withdrawn, activated, extended, early-terminated, buy-out, expired.
Determine Lease Term
For IFRS16 (ASC842) purposes, the lease term is determined by a number of circumstances – whether you are reasonably certain to execute the purchase option, or extension option, or terminate the lease before the end of the term.
Calculate Lease Liability
Based on the given parameters, the system calculates lease liability as the present value of lease payments, and the present value of amounts due at the end of the lease term, taking into account purchase or termination options. The system will automatically adjust lease liability as the circumstances change.
Calculate Value of Right-of-Use Asset (RoU)
The system calculates RoU Asset value taking into account lease liability, costs before lease commencement and the expected cost of asset return (e.g. costs of equipment dismantling, costs of restoring leased premises). If the lease liability is re-assessed, the RoU asset value changes accordingly.
Projection and Simulation
The Soft4Lessee system enables you to calculate the projection of lease liability over the lease term (by each lease, group of similar leases, or overall portfolio) and calculate the projection of asset values over the asset lifetime (by each unit, asset class, or overall portfolio).
Determine Asset Depreciation Term
RoU Asset is depreciated over the lease term or over the useful life of the underlying the asset. If the lease transfers ownership of the asset to the lessee by the end of the lease term, or the lessee is certain to exercise the purchase option, the asset is depreciated over the useful life of the asset (the system has a pre-configured useful life parameter per asset category).
Interest on Lease Liability
The system calculates interest and creates G/L postings at the end of the reporting period, using either the interest rate implicit in the lease or the lessee incremental borrowing rate.
If you have a composite contract that includes leases and services, the non-lease component is separated and posts to the operating expense account, separately from interest expense and asset depreciation expense, as required by IFRS16.
The system allows lease modifications after the commencement date and will calculate the impact on lease liability and right-of-use asset. The system will produce G/L postings to reflect any lease modification.
If you have leases with variable lease payments dependent on an index (like the Consumer Price Index) or reference interest rate (like LIBOR, EURIBOR), the system is able to calculate re-pricing and reflect it in accounting, as per IFRS16 requirements.
As circumstances change, the system is able to calculate adjustments to lease liability and right-of-use asset value, and produce G/L postings accordingly.
Calculate RoU Asset Depreciation
The system calculates depreciation using one of three methods: straight-line, declining-balance, or production-based. The system produces postings to G/L accounts by asset class.
The system will split cash-flows into the principal portion and the interest portion of lease payments, as required by IAS 7.
If you have leases denominated in a foreign currency, the system will re-measure lease liabilities using closing currency exchange rates at the end of each reporting period, as required by the IAS 21 standard. The exchange rate difference is recognized as a gain or loss, not affecting the Right-of-Use asset value.
General Ledger Integration
The Soft4Lessee system will produce required G/L transactions at each due date and at the end of the accounting period.
Data Import/ Export
As already mentioned above, the Soft4Lessee system has comprehensive functionality for import and export to/from other systems, using one of the following methods (or combination of methods): webservice, Excel files, XML files.
IFRS16 Practical Expedients
With Soft4Lessee, you can choose to apply practical expedients allowed for short-term leases and low-value leases (posts to operating expenses).
- Transition to IFRS16
On the first adoption of IFRS16, you can choose which transition option to apply, as Soft4Lessee supports both options allowed by IFRS16 standard:
- Cumulative catch-up
Soft4Lessee system description