The International Standards Board (IASB) and the Financial Accounting Standards Board (FIASB), have announced that the final “Leases Standard” will be set before the end of this year.
Although the exact changes are not final, the tentative decisions give a clear indication of what the new leases standard impact may be.
The key points from the tentative decisions include:
- A new leases definition
- Changes to the way leases are recognised on the company balance sheet
- Introduction of income statement recognition profile
- A new model for lessor accounting
- Increased disclosure within financial statements
The proposed changes seem to be harmless, but the leases standard impact will be very significant and will affect every company having either financial leases or operating leases.
As I see it, the main challenge is to analyse and assess all impacts of these proposed changes both on the financials and on the company. This is not a just a matter of collecting information and presenting it using a new format. This process will require companies to make a considerable effort not only from a financial, tax or technological point of view, but from the business culture angle as well.
This is a perfect opportunity to look at your company from another perspective in order to improve your value chain, adding innovation, simplifying your business processes. It is the appropriate time to complete your business transformation.
When The Changes Become Effective
The proposed effective date is January 2018, and this is not the only upcoming change that could impact on your business. It is almost sure that, at least, IFRS 15 Revenue from contracts with customers and IFRS 9 Financial instruments will be made applicable at the same time.
This deadline appears to be very distant in time, but it is not. Similarly the 2000 Effect and the Euro implementation felt too far away, but happened years ago. It is important to start thinking about the implications sooner rather than later.
Is Your Company Ready For The Leases Standard Impact?
The main questions that arise at this point are … are your company, your systems and yourself ready for these new upcoming changes?
If so, what measures are you taking/have you been taking so far? Where do you have all this information stored? Do you trust your supporting systems to effectively manage these changes?
VIP Apps Consulting Ltd can successfully assist you in financial and strategic impact analysis, modelling, business process and technology strategy assessment and implementation through our AMOBI methodology and our expertise. We are here to help you.
