It’s no secret that COVID-19 has caused huge economic upheaval for many companies across Australia and New Zealand. What’s less well known is that the pandemic coincides with another significant challenge for thousands of firms – the implementation of the new IFRS 16: Leases reporting standard.

A game changer for lease reporting

IFRS 16, effective for annual reporting periods after January 2019, introduces a single lessee accounting model and means companies that use leasing as a way to access assets must now comply with the new standard when preparing financial statements.

While the aim of IFRS 16 is to help investors and companies make better credit and investment decisions, the reporting changes it brings with it also have an impact on all businesses that have lease arrangements.

That’s why, according to cloud-based collaborative lease management and lease accounting software provider Nomos One, it’s vital that companies be adequately prepared to meet the requirements brought in by IFRS 16.

Removing the heavy lifting

Murray Harrington, CEO of the Australasian company, says Nomos One has seen significant growth in demand for its lease accounting and lease management software in recent times as companies, both locally and overseas, have sought to comply with the new standard.

“One reason we’ve grown is that IFRS 16 has come into the reporting framework and businesses who are reporting under IFRS 16 need to extract their data out of Excel spreadsheets and onto some sort of platform,” says Harrington.

“From an accounting perspective, it’s very much about removing a lot of the manual work they have to do and the reliance on unwieldy spreadsheets.”

The streamlining of spreadsheet-based processes is one of the big advantages of letting software do the heavy lifting when it comes to IFRS 16.

“From an accounting perspective, it’s very much about removing a lot of the manual work they have to do and the reliance on unwieldy spreadsheets.”

In the case of Nomos One’s cloud-based solution, it was developed with chartered accountants who “live and breathe IFRS 16” and came up with a world-class IFRS 16 compliant module tested against over 1000 scenarios provided by Big Four accounting firms.

“Companies have to do the work: IFRS 16 especially is a standard that many companies have no choice but to comply with,” says Harrington.

“So, to have software that does all the manual calculations and isn’t reliant on a spreadsheet model gives them great confidence. When they’re being audited, our solution means they’re presenting numbers they trust and can believe in.”

A focus on people is key

Along with the advantages that technology brings, Harrington stresses that it’s critical for people to stay at the core of IFRS lease management and lease accounting.

It’s important because it enables Nomos One to better cater to the individual needs of customers by “standing in their shoes”, he says.

“We have recruited former CFOs, financial controllers and auditors, so we have been able to experience the various customer interfaces with the product.

“We’re not an accounting practice and we don’t give accounting advice, but when we speak to an accountant our experience means we’re able to understand the question they’re asking us and what they want to get out of the system, and we can help them achieve that.”

A people-centred focus also extends to the customer journey with the software.

“When they join us, we now have a really strong comprehensive onboarding process where we work out what they’re trying to achieve, train them on how to use the system, and make sure they’re good to go. It’s not just ‘here’s the system and away you go’.”

IFRS 16 in a pandemic

Another factor at play right now is, of course, COVID-19. With remote working likely to stay for some time, especially at many large global companies, Harrington says it makes sense to consider a solution for IFRS 16 compliance ideally suited to today’s unprecedented conditions.

“We’re a purely cloud-delivered system so it doesn’t matter where you’re based, you can use the software,” he says.

He adds that Nomos One serves clients in New Zealand, Australia, Canada, the UK, Greece, Singapore and Hong Kong, to name a few.

“Especially with COVID-19, everyone’s looking at working remotely and getting more accuracy and competence in their information. But, given they’re working on a disparate basis, there’s the opportunity for error and inefficiency.

“That’s why having multiple interfaces of information, by using an IFRS-16-compliant lease management and lease accounting platform, would, in my view, be a really smart decision.”

Staying ahead of the game

Harrington concedes that while many in the accounting sector may have found this year’s first implementation of IFRS 16 problematic, it can be different next time around.

Indeed, he believes now is the time to start thinking about the year ahead and whether firms “want to go the manual process again next year”.

“Making this decision now and giving it time to be bedded in before they go to their year-end next year is a really compelling reason to go with this now.”

For accountants and auditors reluctant to jump into a SaaS solution for IFRS 16 compliance, Harrington’s message is that they’ll be joining a long list of blue-chip customers. On that point, he says, professionals in the space “can take confidence that other large organisations are using the same product”.

Software specialists

As specialists in this software, Harrington says, "We get to see a lot, therefore we’re going to be at the front of the pack in terms of thought leadership, in terms of reporting, in this particular area.

“It’s a new standard,” he adds. “It’s not black and white and it is, to an extent, grey, but we are committed to moving with the development and the understanding of IFRS 16 to remain much more than a software vendor.”

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