With more than half of CAs reporting a moderate to very significant impact from adopting IFRS 16 Leases, many businesses are looking for ways to streamline the process to help manage compliance.

The standard, which came into effect in 2019, requires nearly all leases to be included on the balance sheet – meaning companies must now record a right-of-use (ROU) asset and a corresponding lease liability (LL) for most of their leasing arrangements.

For many businesses, the complexities of ensuring compliance and updating systems have proven to be major challenges – particularly those with large or diverse lease portfolios. Yet, despite this complexity, many still rely on spreadsheets or disconnected processes to manage leases. This can lead to inefficiencies, errors and missed opportunities, says Ben Sloper CA, CEO of Nomos One, a lease accounting software system designed to support everything from initial lease set-up to ongoing lease management.

“There is a huge amount of activity and information that needs to be accurately reflected across a growing lease portfolio,” says Sloper. “The risk of using a manual process, such as Excel, is that with all this data, it is very easy for a formula to break, ultimately resulting in inaccuracies in your IFRS 16 outputs.”

Opportunity to add value

Sloper advises businesses that are looking at ways to improve their processes to also see this as an opportunity to take stock and improve their lease management processes to add value.

“IFRS 16 is a compliance need but you shouldn’t simply be aiming to find a way to produce your IFRS 16 outputs,” he says.

Moving to an automated system also helps manage knowledge gaps that can occur due to staffing turnover or if roles change, as spreadsheets often rely on the knowledge of specific team members.

“We also see that as more data is added over time, the model can become more and more inflexible, which means it becomes harder and harder to use as time goes on.”

Automatic updates

The Nomos One platform automates the lease management and lease reporting process, which accurately handles updates, modifications and changes throughout the life cycle of a lease.

“Using such a system allows your team to work proactively with up-to-date information and ensure key dates, such as renewals, don’t get missed,” says Sloper.

It means running journals and compiling reports becomes a task that can be completed at the click of a button, and if updates or changes are made, those reports can be quickly regenerated, saving significant time and reducing the risk of error.

“Property and finance teams can work together maintaining one system that is live and up to date. This creates further efficiency and allows for information to move more quickly across the business,” says Sloper.

It is an investment that quickly pays off, he adds.

“We commonly see businesses that implement our software report that the time savings and efficiency that is created by having a system to proactively manage their lease portfolio pays back the initial investment in a very short space of time.” 

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