Can software solutions simplify IFRS16 compliance reporting?

Managing lease accounting standards has become increasingly complex for finance teams worldwide. With the introduction of more rigorous reporting requirements, businesses face significant challenges in achieving accurate, timely compliance. Specialized technology can dramatically transform this process, turning what was once an overwhelming administrative burden into a streamlined, reliable workflow. The right technological solution offers automation of calculations, comprehensive reporting capabilities, and proper handling of complex lease modifications—all critical elements for successful financial reporting in today’s regulatory environment.

What is IFRS16 and why is compliance challenging?

IFRS16 represents a fundamental shift in lease accounting, requiring organizations to recognize most leases on their balance sheets. This standard, implemented in 2019, eliminates the distinction between operating and finance leases for lessees, treating nearly all leases as assets and liabilities on financial statements.

Compliance with this standard presents significant challenges for organizations managing their leases manually. Finance teams must identify all qualifying lease contracts, extract complex data points, calculate right-of-use assets and lease liabilities, manage ongoing modifications, and produce comprehensive disclosures. Without specialized tools, these tasks often involve error-prone spreadsheets and time-consuming manual calculations.

The complexity increases when handling lease modifications, indexation changes, extension options, and multicurrency situations. For organizations with numerous lease contracts across different departments and regions, maintaining compliance manually becomes virtually impossible, leading to reporting inaccuracies and audit issues.

How do software solutions address IFRS16 compliance issues?

Specialized lease accounting solutions transform IFRS16 compliance from a burdensome process to a manageable one. Our Frame IFRS 16 Lease Management application offers comprehensive functionality that directly addresses the most challenging aspects of the standard.

With dedicated software, organizations benefit from centralized contract management that serves as a single source of truth for all lease data. After manual input of contract details, the system automatically generates the complex calculations required for compliance, including lease liability amortization schedules and right-of-use asset depreciation plans.

Software solutions particularly excel at handling complex scenarios that cause difficulties in manual calculations, such as lease modifications, extension options, and variable payment adjustments. Frame can automatically recalculate the impact of these changes on financial statements, ensuring compliant reporting with minimal effort.

Additionally, proper software eliminates the risk of formula errors common in spreadsheets and provides an audit trail of all changes made to lease contracts, greatly simplifying the verification process during external audits.

What are the key features to look for in IFRS16 compliance software?

When evaluating IFRS16 software solutions, certain features are essential for effective compliance management. Comprehensive lease portfolio management functionality should accommodate all lease types and contract details, from basic information to IFRS16-specific data fields like discount rates and termination options.

Look for solutions offering automated calculations that handle complex scenarios including contract modifications, currency conversions, and variable payments. Frame provides these capabilities while ensuring all calculations adhere strictly to IFRS16 requirements.

Reporting capabilities are critical—the system should generate standard-compliant reports for balance sheets, income statements, and required disclosures. Effective solutions like ours offer customizable reporting templates and data export functions compatible with existing accounting systems.

Other essential features include:

• Audit trail functionality tracking all changes to lease data
• Role-based user access controls
• Notification systems for important dates and deadlines
• Clear reconciliation reports for verification
• Data validation tools to ensure accuracy

How much time can businesses save with IFRS16 software solutions?

The implementation of specialized IFRS16 software yields substantial time savings across financial operations. Organizations typically report 70-80% reduction in time spent on lease accounting tasks after implementing proper software solutions.

For a medium-sized company managing 100 leases, manual calculations might consume up to 40 hours monthly. With Frame IFRS 16, this can be reduced to approximately 8 hours—primarily for data review and verification rather than calculation.

During period-end closing, the time savings become even more significant. What previously took days of reconciliation and manual verification can be completed in hours. Additionally, audit preparation time typically decreases by 50-60%, as all necessary documentation and calculations are systematically organized and readily available.

Beyond direct time savings, organizations benefit from improved accuracy, reducing costly errors and the need for restatements that can consume additional resources and damage stakeholder confidence.

Are cloud-based or on-premise IFRS16 solutions better for compliance?

Both cloud-based and on-premise IFRS16 solutions offer distinct advantages depending on organizational needs and IT infrastructure.

Cloud-based solutions like our SaaS offering provide immediate deployment with minimal IT resource requirements. They offer automatic updates ensuring compliance with evolving standards and accessibility from any location—particularly valuable for organizations with remote finance teams or multiple office locations.

On-premise solutions may appeal to organizations with strict data sovereignty requirements or existing significant IT infrastructure investments. These installations can offer tighter integration with legacy systems and may provide more customization options for specialized reporting needs.

Security considerations exist for both options. Cloud solutions leverage specialized security expertise and regular updates but require proper vendor assessment. On-premise installations offer direct control over security protocols but demand internal expertise to maintain protection against evolving threats.

Most midsize to large organizations increasingly prefer cloud-based solutions for their scalability, reduced maintenance burden, and continuous compliance updates.

IFRS16 software implementation: best practices for success

Successful implementation of IFRS16 software requires thorough planning and systematic execution. Begin with comprehensive stakeholder engagement, involving not just finance teams but also IT, legal, procurement, and affected business units to ensure alignment and cooperation.

Data preparation is critical—conduct a thorough inventory of all leases and related documentation before migration. Verify completeness and accuracy of lease information, including historical amendments and modifications that might affect calculations.

Implement a phased testing approach, starting with a representative sample of leases across different categories. Validate calculations against manual benchmarks to ensure accuracy before full deployment.

Staff training should be tailored to different user roles, from basic data entry personnel to financial analysts interpreting reports. Establishing a center of excellence or designated super-users helps sustain knowledge and address ongoing questions.

Post-implementation reviews at 30, 90, and 180 days help identify and resolve any emerging issues while optimizing processes for maximum efficiency. Regular refresher training ensures continued compliance as team members change or standards evolve.

Transforming IFRS16 compliance with specialized technology

The right software solution transforms IFRS16 compliance from an administrative burden into a streamlined process. By implementing Frame IFRS 16 Lease Management application, organizations gain accuracy, efficiency, and confidence in their lease accounting practices.

With proper implementation following our outlined best practices, finance teams can redirect their valuable time from manual calculations to strategic financial analysis. The investment in specialized IFRS16 software ultimately delivers returns through reduced compliance costs, minimized audit issues, and improved financial decision-making.

As regulatory requirements continue to evolve, having a flexible, purpose-built solution becomes increasingly valuable for maintaining seamless compliance while focusing on your core business objectives.