Leases and leasing agreements affect your balance sheet. But how do you calculate these effects with many contracts and constant changes? This task can be large, especially considering that the leasing agreements must be in accordance with IFRS 16.
Written by Terje Glesaaen
ShareControl IFRS 16 system efficiently handles all leasing agreements in accordance with IFRS 16. The IFRS 16 software is delivered as a Microsoft 365 add-in. It is easy to install, and you can use it instantly.
What is IFRS 16?
IFRS 16 is the new standard for lease accounting that was released in January 2016. The goal of this standard is to make lease accounting more transparent and comparable across organizations. The new standard replaces IAS 17, which was released in 1993.
Under IFRS 16, lessees will be required to recognize most leases on their balance sheet. This can be a complex process, so it is important to use software that is specifically designed to help with IFRS 16 compliance. If you want more detailed information about IFRS 16, please go to the official IFRS website here.
What has changed under IFRS 16?
The main difference between IFRS 16 and IAS 17 is that lessees will now be required to recognize most leases on their balance sheet. This means that they must provide information about their leasing agreements in the accounts. Calculations according to IFRS 16 can therefore be perceived as more demanding than previously.
Lessees will also need to disclose more information about their leases, including the total amount of lease payments, the term of the lease, and the interest rate.
What are the challenges of IFRS 16?
IFRS 16 can be a complex standard to comply with, particularly for lessees. This is because most leases will now need to be recognized on the balance sheet.
Lessees will also need to disclose more information about their leases, which can be challenging if they have many different leasing agreements.
How does it affect financial reporting?
IFRS 16 will have a significant impact on financial reporting. This is because most leases will now need to be recognized on the balance sheet.
Lessees will need to provide information about their leasing agreements in their financial statements. This includes the total amount of lease payments, the term of the lease, and the interest rate.
What are the benefits of IFRS 16?
Despite the challenges, there are several benefits of IFRS 16. One of the main benefits is that it will make lease accounting more transparent and comparable across organizations.
This will allow investors and other users of financial statements to compare leasing arrangements between different companies more easily.
Another benefit of IFRS 16 is that it will provide lessees with more flexibility in how they finance their operations. This is because leases can now be classified as either operating or finance leases.
Operating leases will not need to be recognized on the balance sheet, which means that lessees can keep their debt levels low.
What is considered a lease under IFRS 16?
A lease is defined as an agreement between two parties, the lessor and the lessee, in which the lessor agrees to provide the lessee with the right to use an asset for a specified period of time.
The asset must be identified in the contract, and the lessee must have the exclusive right to use it. The rental period must be at least 12 months.
What are the benefits of using ShareControl IFRS 16 software?
The ShareControl IFRS 16 system can help you with all aspects of complying with that standard. The software is easy to install and use, and it includes everything you need to manage your leasing agreements effectively. The software is delivered as a Microsoft 365 add-in, so you can use it immediately. ShareControl IFRS 16 is updated regularly.
Read also: Implementation of IFRS 16 before listing
Advantages of ShareControl IFRS 16:
- A lease register that records all leases in one place
- The ability to track changes to leasing agreements
- Automatic calculation of lease payments
- Reporting tools that help you prepare financial statements in accordance with IFRS 16
If you are looking for software to help you comply with IFRS 16, ShareControl is a great option. It is easy to use and includes everything you need to manage your leasing agreements effectively.
If you would like to learn more about ShareControl and ShareControl IFRS 16 software, please contact us here.