IFRS 16 is about achieving greater financial transparency. The only way an organisation can truly accomplish this is by safeguarding the integrity of its lease information. It’s simply not enough to be in a satisfactory position by ‘deadline day’, rather businesses need to be ensuring they are fully compliant at any given time, throughout time. But how is this done exactly? What are the steps that need to be taken? And what are the risks to data integrity within each of these? This blog series aims to answer these questions by breaking the compliance journey down into four identifiable stages.
In this blog, we’re looking at steps required to ensure compliance throughout the ongoing management of data.
Ongoing management of data
IFRS 16 is as much about an organisation’s ongoing management of information as it is about preparation and transition. It’s not enough for a company’s leased position to be merely satisfactory come January 1st 2019, the tools an organisation uses need to be agile enough to deal with the ever-changing nature of lease data. It’s arguable that it’s not even possible for human labour to adequately manage the dynamic life of a lease without constant diligent effort, let alone the potentially thousands that an international organisation will have.
There are a huge number of variables that can influence the outcome of final reports because lease information is subject to constant change. Rent reviews, extension options, options to exit a lease early, and new leasing terms are just some of the possible changes that can occur at a moment’s notice. The system a company uses must therefore be able to apply and update changes consistently across a network, and in a timely fashion. If these changes are not made within time, calculations will not add up resulting in erroneous reports and red flags with auditors.
No matter how diligent a company is, going about this constant monitoring and editing process using spreadsheet software will eventually result in errors. There’s also a high possibility that a company will work on certain lease information and not realise that there has been an update which is yet to be applied. Again, this possibility restates the need for collaborative platforms that enable communication across a company network. Some organisations might look to make use of spreadsheet software initially, but the adaptability of an out-the-box solution readied for IFRS 16 from the moment a company begin transitioning will inevitably pay dividends in the long run. A targeted technology stack may cost more, but the ability to know a leased position is completely accurate and up to date cannot be overstated.
Software is now intuitive and intelligent enough to alleviate much of the stresses associated with regulatory compliance. IFRS 16 is about transparency throughout the workflow, from data capture to the publishing of final reports. Software platforms like Horizon offer businesses the flexibility and assurances they need in an era of unprecedented scrutiny and transparent financial reporting.