IFRS 16 is a major overhaul to the accounting standards for leases. The new accounting standard requires all leased vehicles to appear on your balance sheet. It’s crucial for fleets to prepare for the implementation of these changes. This will ensure a seamless transition from IAS 17 to IFRS 16.
Although IFRS 16 only takes effect from 1 January 2019, a lot of changes need to be implemented beforehand, so now is the time to get your fleet ready.
According to PricewaterhouseCoopers, “Changes to the lease accounting standard have a far-reaching impact on lessees’ business processes, systems and controls. Lessees will require significantly more data around their leases than before given the on-balance sheet accounting for almost all leases. Companies will need to take a cross-functional approach to implementation, not just accounting.”
To find out more about IFRS 16 and how it affects fleet management, read our article The impact of IFRS 16 on fleet management.
IFRS 16 impacts all lessees. To determine whether you’re considered a lessee according to the definition of a lease (and therefore need to comply with IFRS 16), you need to review your fleet contracts. This process requires a lot of reporting, technical and financial adjustments, so it’s a good idea to get a head start.
Establishing who in your team will be responsible for implementing these changes will ensure that nothing slips through the cracks.
Under the new standard, a contract contains a lease if it:
To determine whether a customer has the right to control an asset, the customer must be able to classify how, and for what purpose, the asset is used.
A substantial amount of data needs to be gathered and analysed to get ready for IFRS 16. Make sure you ask the right questions including:
The earlier you prepare for IFRS 16, the easier it will be to get your fleet fully compliant by 1 January 2019. Don’t leave it to the last minute. Book an appointment with one of our sales consultants below: