We've previously discussed the significance of implementing lease accounting software, emphasising the automation benefits it can bring. Continuing our exploration into the transformative role of lease accounting automation, we focus below on another crucial benefit of adopting technological solutions: how compliance automation can simplify meeting NZ and Australia's evolving accounting standards, particularly, IFRS 16 (AASB 16).
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Understanding IFRS 16: The shift in lease accounting standards
Under previous standards, lease accounting primarily involved tracking total rent expenses and future lease payments for annual reports. IFRS 16 represents a significant shift from previous lease accounting practices, introducing a more comprehensive approach. The standard was developed to more accurately reflect the impact of a lease contract, enhancing transparency about lease obligations and the assets.
The implementation of IFRS 16 has placed additional demands on finance professionals, requiring a more detailed and accurate handling of lease information. This task can become increasingly challenging, especially if the number of leases a company manages is growing. Traditional tools are not always able to help with navigating the intricacies and variations of lease contracts under IFRS 16, while the decentralised nature of lease-related information and its dispersion across different departments can add another layer of complexity to the compliance process.
Streamlining compliance with automation
Automated calculations and outputs
Compliance automation addresses lease accounting challenges and is designed to align calculations and outputs with IFRS 16 standards. This alignment promotes ongoing adherence to regulations, which is crucial not only for operational and reporting purposes, but also from an audit perspective.
Centralised and reliable process
Having all data centralised and processes standardised simplifies the audit process, as the steps are uniform. With automation, the entire lease accounting process becomes centralised and enhances reliability. This centralisation helps establish procedures that are consistent, traceable and can be reviewed easily during audits.
Tracking and logging lease events
Automation tools offer significant advantages in terms of event management. When lease events are updated or tasks are performed, these actions are automatically tracked and logged, which helps with maintaining compliance, especially when dealing with frequent lease modifications or complex contractual variations.
Operational and reporting advantages
Compliance automation aids in both operational efficiency and reporting accuracy. It streamlines the process of gathering and processing lease data, reducing the time and resources traditionally required for manual compilation and analysis. This efficiency is particularly beneficial in dynamic economic conditions where swift adaptation to changes is essential.
Embracing automation for compliance and beyond
The transition to automated lease accounting and compliance automation, while challenging, presents an opportunity for organisations to streamline their processes and promote compliance with complex standards like IFRS 16. Nomos One is at the forefront of this transformation, offering a robust and user-friendly solution backed by comprehensive support. Our platform is designed to cater to a wide range of needs, ensuring that businesses of all sizes and industries can effectively manage and account for their lease portfolios.
Our IFRS 16 calculation engine is capable of handling various lease-related data points, such as payments, terms, rent reviews, and other obligations, to accurately calculate lease liabilities and right-of-use asset amounts. With features that include effortless financial report generation, workflow assistance and a centralised platform, Nomos One provides a streamlined solution for managing the intricacies of lease accounting under IFRS 16, further simplifying the compliance process.
At Nomos One, we are proud to support companies in navigating the complexities of lease accounting, helping them to achieve both compliance and operational efficiency in today’s financial landscape.
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