ShareControl IFRS 16 feature
How the discount rate is handled in ShareControl IFRS 16
The discount rate affects the lease liability, the right-of-use asset, the interest expense and the entire amortisation schedule. ShareControl IFRS 16 lets you register the discount rate on the lease, categorise it and attach comments and documentation to the lease. The calculation, amortisation schedule and accounting basis all build on the same registration.
How it works
How the discount rate works in ShareControl IFRS 16
ShareControl keeps the rate, lease data, payment schedule and documentation in the same solution. Once the rate is registered, it is used directly to calculate the lease liability, the right-of-use asset and the amortisation schedule.
1
Register the lease, payment schedule, lease term and currency.
2
Register the discount rate and select a discount rate category.
3
The system calculates the present value, lease liability and amortisation schedule.
4
The rate, category and any comments stay with the lease and can be verified during the audit.
What our customers say
Why our customers like ShareControl IFRS 16
“Share Control’s strength is that their IFRS 16 system and professional expertise give us peace of mind”
– Per Øyvind Reneflot, Senior Advisor
Aker Solutions
Share Control has developed a user-friendly IFRS 16 system that meets our reporting obligations under IFRS 16. The platform is easy to navigate and allows both a quick glance at activity on individual leases whilst also allowing users to dig deeper to understand individual lease contract components.
Rate selection
Handling the implicit rate and the incremental borrowing rate
Choosing between the interest rate implicit in the lease and the incremental borrowing rate is a professional judgement the entity makes itself, normally in dialogue with its auditor. In ShareControl IFRS 16, the chosen rate is registered on the lease and can be linked to a discount rate category: a lookup list the entity defines and controls itself.
| Rate type | When is it used? | What ShareControl IFRS 16 documents |
|---|---|---|
| Interest rate implicit in the lease | When the rate can be readily determined from the lease | Contract basis, calculation basis and assessment |
| Incremental borrowing rate | When the implicit rate cannot be readily determined | Method, source, term, currency and risk assessment |
| Lease-specific rate | When the lease requires an individual assessment | Lease-specific assumptions and documentation |
Portfolio rate: A portfolio rate is not a separate rate type under IFRS 16. The same rate can nevertheless be used for a portfolio of similar leases where the entity considers this appropriate, typically leases with a similar term, currency and risk profile. In ShareControl, the rate is then registered on each of those leases with the same discount rate category, so the grouping is visible in the portfolio.
Registration
Register the discount rate on the lease
The rate decision should not sit in a separate spreadsheet. ShareControl IFRS 16 lets you register the discount rate on the lease and attach relevant information and documentation to it.
Discount rate on each individual lease
Discount rate category from a list you control
The same rate on similar leases
Comments and documentation on the lease
Calculation
Calculate the lease liability from the payment schedule, rate and lease term
ShareControl IFRS 16 uses the payment schedule, discount rate and lease term to calculate the present value and the lease liability.
Present value of future lease payments
Lease liability
Right-of-use asset
Interest expense over time
Amortisation plan
Amortisation
The rate carries through to the amortisation schedule
Once the discount rate has been chosen, it carries through to the amortisation schedule. This ties the rate decision, calculation, accruals and accounting together.
Monthly interest calculation
Allocation of payments
Reduction of the lease liability
Remaining liability per period
Basis for the accounting journal
Portfolio
Manage rates per lease or per portfolio
Some leases require an individual rate assessment. For leases with a similar term, currency and risk profile, the same rate can be used where the entity considers this appropriate.
Rate per individual lease
The same rate on similar leases
Rates per company
Rates per currency
Rates per term
Documentation
Documented assumptions for the audit
During the audit, the entity must be able to show which rate has been applied to each lease. ShareControl IFRS 16 lets you register the discount rate on the lease and attach relevant information and documentation to it.
Which rate is registered on the lease
Which discount rate category the rate is linked to
Which calculation and amortisation schedule the rate underlies
History of changes to the lease
Manage discount rates with full control
See how ShareControl IFRS 16 makes it easier to document rate decisions, calculate lease liabilities and ensure traceability in the IFRS 16 process.
