Why 83% of Auditors Recommend Specialized Software for IFRS 16 Compliance

What exactly is IFRS 16 and why should you care?

Picture this: you’re running a business with multiple lease agreements for office spaces, equipment, and vehicles. Everything seems fine until suddenly you hear about IFRS 16. Don’t worry – it’s not as intimidating as it sounds! IFRS 16 is simply an accounting standard introduced by the International Accounting Standards Board that changed how companies record lease agreements on their financial statements.

The core concept of IFRS 16 is straightforward: virtually all leases now appear on the balance sheet. Previously, many leases could remain “off-balance sheet,” but that cozy arrangement is gone. Now, companies must recognize a right-of-use asset and a corresponding lease liability for most leases, making your balance sheet look quite different than before.

Why does this matter? Well, beyond keeping regulators happy, non-compliance can lead to serious consequences including financial restatements, damaged investor confidence, and even potential legal issues. The challenge many businesses face is managing the complexity of calculations, tracking numerous lease agreements, and handling modifications to these agreements – all while maintaining an auditable trail of changes.

The surprising benefits of IFRS 16 software that auditors love

While spreadsheets might seem like a budget-friendly option for IFRS 16 compliance, there’s a reason 83% of auditors recommend specialized software instead. The benefits go far beyond simply “being compliant” – they actually make your financial life easier!

First, automation is a game-changer. Our Frame solution automatically performs complex calculations like present value determinations, lease liability amortization, and right-of-use asset depreciation. This significantly reduces the risk of human error that often plagues spreadsheet-based approaches. When your auditors see consistent, reliable calculations that align with IFRS 16 requirements, their job becomes much smoother – and so does yours.

Another benefit auditors absolutely adore is the comprehensive audit trail. Frame provides complete visibility into who made changes, when they made them, and exactly what was modified. This transparency is crucial during audit season and provides peace of mind that your compliance efforts are rock-solid. Plus, the time savings are enormous – what might take days with spreadsheets can be accomplished in minutes with specialized software.

How specialized software transforms the lease accounting process

The transformation from manual lease accounting to software-powered processes is truly remarkable. With Frame IFRS 16 Lease Management application, the journey becomes straightforward even for complex lease portfolios.

While you’ll still need to manually input contract details (an important step to ensure accuracy), the software handles all the heavy lifting afterward. Once your lease data is entered, Frame automatically calculates lease liability and right-of-use assets according to IFRS 16 requirements. The system effortlessly manages all types of changes to lease contracts – extensions, price adjustments, scope changes – and immediately recalculates the impact on your financial statements.

Compare this to the traditional spreadsheet approach, which typically involves:

• Creating complex formulas that are prone to breaking
• Manually updating calculations when lease terms change
• Struggling to maintain version control across multiple files
• Spending countless hours reconciling discrepancies

With specialized software, these headaches simply vanish. Your lease management process becomes streamlined, accurate, and significantly less stressful.

Real companies, real results: IFRS 16 software success stories

The proof is in the pudding, as they say! We’ve seen numerous organizations transform their lease accounting processes with Frame. One European retail company with over 500 property leases across multiple countries was initially drowning in spreadsheets and manual calculations. After implementing Frame, they reduced their monthly closing process for lease accounting from five days to just a few hours.

Another success story comes from a manufacturing firm that was struggling with frequent lease modifications. Their finance team was spending approximately 20 hours per month recalculating lease values and updating their records. After implementing our specialized software, they now manage these changes in just 2-3 hours monthly, with significantly improved accuracy. Their most recent audit was also completed in record time, with auditors specifically praising the clear audit trail and consistent calculations.

The implementation timeline for most companies ranges from 2-8 weeks, depending on portfolio complexity. The ROI becomes apparent almost immediately, with most clients reporting that the software pays for itself within the first year through time savings and reduced audit costs alone.

How to choose the right IFRS 16 compliance software for your organization

Finding the perfect IFRS 16 software doesn’t have to be complicated. Start by assessing your lease portfolio – how many leases do you manage? Are they relatively standard or highly complex? Do they span multiple currencies or jurisdictions? The answers will help determine the level of sophistication you need.

Key features to look for include:

• Comprehensive contract management capabilities
• Automatic calculation of lease liabilities and right-of-use assets
• Ability to handle contract modifications seamlessly
• Clear audit trails and reconciliation reports
• Flexible reporting options that support both compliance and business insights

When evaluating options, ask potential vendors about their experience with companies similar to yours. Request demonstrations using scenarios that match your actual lease situations. With Frame, we pride ourselves on offering a solution that’s both powerful enough for complex multinational corporations yet intuitive enough that anyone in your organization can use it.

IFRS 16 compliance doesn’t have to be a headache. With the right software partner, it can actually become an opportunity to streamline processes, gain better visibility into your lease obligations, and free your team to focus on more strategic activities. That’s exactly why auditors overwhelmingly recommend specialized solutions like Frame – they’ve seen the difference it makes firsthand.