How to Streamline IFRS 16 Compliance with Automated Lease Management in 2023

Let’s face it – accounting standards aren’t exactly the life of the party. But when it comes to IFRS 16 compliance, there’s no need to break into a cold sweat every reporting season. What if we told you that this accounting behemoth can actually be tamed with the right digital tools? As we navigate through 2023, automation is transforming what was once a nightmare of spreadsheets and calculations into a surprisingly manageable process. Our Frame IFRS 16 Lease Management application is designed specifically to take the headache out of lease accounting, giving finance teams back their precious time (and sanity). Ready to discover how you can turn IFRS 16 compliance from a quarterly crisis into just another task you can tick off with minimal fuss? Let’s dive in.

IFRS 16: The accounting monster that isn’t so scary after all

Remember the boogeyman from childhood? IFRS 16 has become something similar in the corporate world – the accounting standard everyone loves to fear. But here’s the thing: like most monsters, it’s much less frightening when you shine a light on it.

At its core, IFRS 16 simply requires companies to bring their leases onto the balance sheet. Yes, that means recognizing right-of-use assets and lease liabilities for virtually all leases. But contrary to popular belief, this isn’t financial rocket science – it’s just a different way of presenting information you already have.

The real challenge isn’t understanding the standard – it’s executing it consistently across dozens, hundreds, or even thousands of lease contracts. That’s where automation comes in. With our Frame IFRS 16 Lease Management application, the complex calculations happen automatically once you’ve entered your contract details. No more wrestling with spreadsheet formulas or panicking about whether you’ve captured all the right variables.

Think of Frame as your personal accounting wizard – it knows all the rules so you don’t have to memorize them. You input the contract data, and it handles the rest. Suddenly, that accounting monster starts to look more like an accounting puppy.

Why are finance teams still pulling their hair out?

Despite it being several years since IFRS 16 came into effect, finance teams across Europe are still struggling with compliance. But why exactly are they reaching for the stress balls and extra coffee?

For starters, manual lease management is a calculation nightmare. Just think about it – each lease contract requires present value calculations, interest and depreciation schedules, and potentially reassessments over its lifetime. Multiply that by dozens or hundreds of leases, and you’ve got a formula for errors.

Then there’s the audit trail problem. When your CFO or auditors ask how you arrived at a particular figure, can you confidently show your working? With spreadsheets passed between team members, version control becomes a genuine concern. “Did we use the April spreadsheet or the revised April spreadsheet?” becomes a too-familiar question.

Let’s not forget the time pressure. Month-end closing is already hectic – adding complex IFRS 16 calculations to the mix is like deciding to renovate your house during a dinner party. It’s just asking for trouble.

And perhaps most painfully, there’s the constant fear of getting it wrong. Financial reporting isn’t an area where “close enough” cuts it, especially for listed companies. The anxiety of miscalculations leading to restatements keeps many finance professionals staring at the ceiling at night.

How does automation turn IFRS 16 into a walk in the park?

Remember how calculators transformed mathematics from painstaking manual computation to push-button simplicity? That’s what Frame does for IFRS 16 compliance. But how exactly does it work this magic?

First, Frame creates a centralized contract repository where all your lease agreements live. Once you’ve input the contract details (just once!), the system takes over. It automatically calculates your right-of-use assets, lease liabilities, interest expenses, and depreciation schedules – all according to the IFRS 16 standard.

Need to handle a contract modification? No problem. Frame manages changes in lease duration, scope, and price with ease. Just update the relevant details, and the system recalculates everything, ensuring your financial statements remain accurate and compliant.

What about those tricky scenarios like variable lease payments, extension options, or foreign currency leases? Frame handles these complexities automatically, applying the correct accounting treatment without you needing to become an IFRS expert.

Perhaps most valuably, Frame generates all the reports and disclosures required for IFRS 16 compliance. The system creates bookkeeping transfer material that can be seamlessly integrated with your existing accounting or consolidation system – no manual re-keying required.

The unexpected benefits beyond just compliance

While keeping auditors happy is certainly important, automation delivers several delightful surprises that go well beyond mere compliance. Think of it as ordering a main course but getting all the sides for free.

For starters, automated lease management provides unprecedented visibility into your lease portfolio. When all your leases live in one system, patterns emerge that were previously invisible. Which departments have the highest leasing costs? Are there opportunities to consolidate vendors or renegotiate terms? Frame helps you see the forest, not just the trees.

Then there’s the forecasting advantage. With accurate lease data at your fingertips, budget projections become more reliable. You can run different scenarios to understand their financial impact before making decisions – like extending a lease versus relocating.

Resource allocation improves dramatically too. When your finance team isn’t buried in spreadsheets and calculations, they can focus on analysis and strategic initiatives that actually move the business forward. Imagine having your brightest financial minds working on growth strategies instead of wrestling with compliance tasks.

Let’s not forget the stress reduction. When your team knows the system is handling calculations correctly, the pressure of reporting deadlines becomes much more manageable. The result? Better work-life balance and higher job satisfaction across your finance department.

Implementing automation without breaking a sweat

Hearing about all these benefits might make you wonder: “Is implementing an automated system going to be a massive project?” The good news is that getting started with Frame is refreshingly straightforward.

Our implementation approach focuses on practical simplicity. Unlike many enterprise software projects that drag on for months, Frame can be up and running quickly. You don’t need to be an IT wizard or IFRS expert to make it happen.

The process starts with a simple data migration. We’ve designed user-friendly templates to help you organize your lease information systematically. And don’t worry about perfect data – you can always refine it once it’s in the system.

Training is equally painless. Frame’s intuitive interface means users can typically get comfortable with the system in just a few sessions. We focus on the practical tasks your team needs to perform rather than overwhelming them with every feature at once.

For companies concerned about disruption, rest assured that Frame works alongside your existing systems. It’s designed to complement your accounting software, not replace it. This means you can implement Frame without disrupting your current financial processes.

And remember – you’re not alone in this journey. Our team provides support throughout the implementation process and beyond, ensuring you get maximum value from the system.

2025 compliance checklist: Set it and (almost) forget it

Now that you’re convinced automation is the way forward, here’s your practical action plan for stress-free compliance in 2025:

• Centralize all lease contracts in Frame, ensuring each one includes standard lease data plus the IFRS 16-specific information
• Set up your discount rates within the system for accurate present value calculations
• Establish a process for capturing new lease agreements and modifications as they occur (not at reporting time!)
• Configure your reporting schedules to align with your financial close calendar
• Define user roles and permissions to ensure proper data governance
• Schedule a monthly reconciliation check to keep everything in perfect balance
• Create a calendar reminder for the quarterly review of lease assumptions and estimates
• Set up your data export formats to match your accounting system’s requirements

With Frame, these steps create a sustainable compliance system that runs smoothly with minimal intervention. You’ll still need to input contract details and review outputs, but the heavy lifting of calculations, bookkeeping transfers, and disclosure preparation happens automatically.

IFRS 16 compliance doesn’t have to be the accounting equivalent of climbing Mount Everest. With the right automated solution, it’s more like a scenic walk through the park – still exercise, but actually enjoyable. And isn’t that how accounting should be?