The new IASB IFRS 16 lease accounting standard is official, and the time for companies to create a compliance plan is here.
For most organizations, establishing right-to-use assets and lease liabilities for real estate and equipment leases will be a sizable task. CoStar’s lease accounting software can help ease ASC 842 compliance projects with the most proven solution for the complex calculations, financial reporting and system integrations.
The major change IFRS 16 makes from IAS 17 is that it removes the operating lease classification for leases, eliminating the ability of corporations to report operating leases in the footnotes of financial statements. The reasoning for the change was that by reporting operating leases in the footnotes, companies were hurting smaller investors that do not have the resources to dig through their financial statements. In response, after a decade of work writing and reviewing exposure drafts, the IASB released IFRS 16. IFRS 16 closes the IAS 17 loophole by requiring that all operating leases now be accounted for as finance leases.
CoStar also recommends these 12 Steps for IASB Lease Accounting Compliance:
- Obtain a full understanding of IASB IFRS 16
- Set a compliance timeline
- Meet with a cross-functional group of leasing stakeholders
- Organize a project team
- Select a software solution for lease management and reporting
- Compile a list of all leases
- Evaluate compliance with existing accounting standards
- Evaluate the HR impact and adjust staffing/training plans
- Set internal accounting policies around leasing
- Evaluate the process flow for leases and adjust to ensure efficiency
- Review new processes, software, policies and pro-forma results with auditors
- Set up a sustainable process for managing leasing data
See why experts recommend CoStar to manage and report on real estate, equipment and other leased assets for compliance with the new IASB IFRS 16 standard on our lease accounting software overview page.