To an accountant, spreadsheets are beautiful– nothing quite compares to the feeling of control and mastery that constructing the perfect arrangement of columns and rows can bring. IFRS 16 calculation spreadsheets have to be near the pinnacle of Excel technology, requiring something akin to the architectural marvel of the Taj Mahal to produce the necessary outputs. While we might not like to admit it – IFRS 16 calculation spreadsheets with this degree of size and complexity can present a fair number of problems.
1. IFRS 16 calculation spreadsheets are complex but do not store the associated knowledge and understanding
We have all probably inherited a job that has felt immediately over our heads. Someone has left, and their workings that remain behind don’t seem to follow any logical setup; there are magic hardcoded numbers everywhere, and none of the IFRS 16 calculations seem to make sense. When the spreadsheet creator left, so did the knowledge of how to understand and continue using it.
Nomos One’s lease accounting software removes the risk of complex calculations being siloed between one or two people. The platform gives an intuitive, visual understanding of the different events occurring over the life of a lease agreement and how these affect financial reporting. Our calculations and reports are easily accessible and transferrable between finance team members, the property team, and beyond.
In addition, our fantastic support team is always on hand to offer technical solutions, additional product training (which may be subject to an additional cost), and other tips and tricks to help you when things need to get done.
2. Spreadsheet calculations are tough to keep track of and align come year-end
End of financial year accounting can be stressful, and there are a lot of different elements that need to come together in a short amount of time. Leasing involves coordinating lots of information, including establishing contract changes, considering accounting judgements, and updating the calculations themselves. This usually requires collaboration from other teams within your organisation. The end of the financial year can be hectic enough without having the added stress of chasing up other teams for vital information.
With Nomos One, the property management and finance teams can work more harmoniously throughout the year. Nomos One creates a place for property managers to document and record any changes to agreements in real time – which are then automatically factored into any recalculations required for financial reporting. This takes a lot of the nitty-gritty accounting off the table – opening up space for more important things.
3. IFRS 16 calculation spreadsheets are inflexible and often set up in less-than-optimal ways
With the past couple of years already having their challenges, introducing new lease accounting standards was further heaped onto an already substantial workload. IFRS 16 requires specifically tailored spreadsheets which would have been complicated to create, irrespective of the other stresses and pressures over this period. A steep learning curve meant that our understanding, comprehension and application of IFRS 16 was developed massively between the initial spreadsheet creation and when this was reviewed for half or full-year purposes. Due to the time involved in overhauling such large and complex initial calculations, these calculations get carried forward with limitations previously not adequately understood.
Unaddressed spreadsheet limitations translate into issues such as the greater risk of misstatement, confusion in understanding the spreadsheets, greater time spent reviewing them, difficulty making lease adjustments, and staff continuity concerns.
Through coming on board with Nomos One, the calculation side of things is taken care of, leaving more time to focus on the more critical things – data inputs, key judgements, review and lease portfolio management (yay!).
4. Lease accounting requires many adjustments
Did we mention that lease accounting was complex? It turns out that many things require consideration in a lease calculation, with many agreements requiring reassessments at least every year.
These adjustments can be hard to pull off in a spreadsheet, quickly getting messy and difficult to review. With the potential for several reassessments to be incorporated into an agreement over its life – it can become tricky to fold in these reassessments to the balance sheet accounts in a way that makes sense.
Nomos One offers a daily calculation report you can download for each agreement from the system. This report drills down on how each balance sheet account is calculated at any point in the agreement's life. This report is a powerful tool for reviewing adjustments – which can be downloaded and provided to auditors. They love it!
5. Spreadsheets break
We have seen plenty of IFRS 16 calculation spreadsheets in our time as part of the onboarding process for Nomos One. Unfortunately, spreadsheets can break – usually from formula errors that can go unnoticed. From our first-hand experience – spreadsheet risk is real, and Nomos One takes it off the table – giving you one less thing to worry about.
To find out how we can help support you with your IFRS 16 reporting requirements, book a demo with one of our leasing experts today.
