What is IFRS 16?
IFRS 16 is a leasing standard that was issued by the International Accounting Standards Board (IASB) in January 2016. It went into effect on January 1, 2019.
A significant change to lease accounting, IFRS 16 follows the “right-of-use" model, which stipulates that if a company has the right to use an asset they are renting, it is classified as a lease for accounting purposes – and thereby must be recognized on the company’s balance sheet.
This change closes the loophole that allowed some significant financial liabilities to be held off balance sheet, with the goal of bringing increased transparency to lease asset reporting and liabilities. Additional changes under IFRS 16 include:
- Lease payments made must be reported as a lease liability on an organization’s balance sheet.
- Additional costs – for maintenance, cleaning, etc. — must be reported separately from primary lease payments.
- Depreciation of assets and interest must be shown on profit and loss accounts.
- Lease agreements can be combined into a portfolio rather than being reported individually.
Lucernex Has A 100% IFRS 16 Compliance Success Rate
Lucernex Lease Administration and Accounting solution can help businesses achieve and maintain IFRS 16, ASC 842 and GASB 87 compliance. Lucernex is designed and customizable to meet the needs of equipment and real estate leases. The software can work to help organizations improve financial decision-making, simplify leasing standard compliance and optimize business processes.
Using Lucernex, customers can also:
- Accurately classify operating leases or finance leases using the ASC 842 test.
- Meet the new financial reporting requirements under ASC 842 & IFRS 16.
- Generate accurate accounting schedules that have been certified by an independent 3rd party accounting firm.
- Handle complex leases using Lucernex’ fully configurable platform.
Features of IFRS 16 Compliance Software
Comprehensive, Secure Lease Information
Your lease accounting software should facilitate compliance with features that ensure data integrity and increase your information’s security, transparency and accuracy. These include:
- Comprehensive data entry validation protocols
- Role-based access
- Complete, real-time audit trails
- The ability to track data modifications in real time.
Lease Remeasurement and Translation
Under the IFRS 16 standards, lessees must remeasure lease liability and right-of-use assets when it comes to future payments or charges. Using Lucernex, you can automatically perform these functions to ensure that your current leases remain compliant.
Easily use customized and canned reports to gain actionable insight about your data and your IFRS 16 compliance. You can also create custom alerts (to remind you of payment dates, renewals and audits) and calculate in the correct currency (including British Pounds, Japanese Yen, Euros, etc.).
Automatic Compliance with All Lease Accounting Standards
IFRS 16 is complex and the lease accounting software you choose should keep that complexity in mind. Lucernex is verified as a compliant solution by a leading independent 3rd party accounting firm for not only IFRS 16 but also GASB No. 87 and ASC 842 standards. This automatic compliance can mitigate audit-associated risks by helping your company easily achieve and maintain compliance over time.
Benefits of IFRS 16 Lease Accounting Software
Simplified Compliance with IFRS 16, GASB 87 and ASC 842
Lucernex offers transparent pricing, scalable functionality, audit logs, comprehensive data integrations and a 100% success rating getting clients into compliance. These features can help you sidestep common lease accounting software concerns like limited functionality, ballooning costs or failed implementation.
Maximize Data Security and Cybersecurity
Cybersecurity threats are prevalent, and your organization must always be prepared to protect your sensitive financial data. Lucernex can help ensure data security by offering:
- Penetration testing
- Encryption: AES-256, TLS 1.2
- Dynamic application security testing
- Authentication - SAML 2.0, JWT
- Key management
- Role-based access controls
Simple Monthly Close Processes
Simplify the monthly close process and data reconciliation with Lucernex’ cause of change reports, data integrations and automated workflows and reporting.
Consolidate Your Documentation
Lease management involves a lot of paperwork, including contracts, portfolios of leases and related documentation. Using Lucernex IFRS 16 software, you can centralize all this information and even create alerts when a document is ready for review or auditing, thereby streamlining document management.
Reduce Costly Human Error
Human mistakes and oversights can lead to data errors or missed compliance deadlines and renewal dates. Use Lucernex IFRS 16 software to avoid such mistakes, thereby reducing costs and increasing efficiency over time.
What to Look for in an IFRS 16 Lease Accounting Software Vendor
The lease accounting software vendor you choose should offer industry expertise when it comes to the nuances of IFRS 16, ASC 842 and GASB 87. The software should also offer key features that facilitate IFRS 16 compliance, including:
Cloud-based, transparent access and controls
- A cloud-based lease database
- The ability to check modifications, lease entries, audit trails and more with just a few clicks.
- The ability to give read-only access to auditors or other viewers
- Cross-departmental access to documentation (so IT, real estate, account and other relevant departments can access)
Customization and automation
- Automated alerts so you always know when an IFRS deadline is near.
- Assurance that disclosures and reports will meet the latest IFRS 16, ASC 842 and GASB 87 requirements
- Customizable and out-of-the-box reports
- Alerts to help you avoid missed payments, overpayment missed deadlines and more
Adequate security protocols and functionalities
- Compliance with SOC 1 and SOC 2
- Multiple levels of access
- Controls that comply with the Sarbanes-Oxley (SOX) Act