Calculate IFRS 16 liability in property leases
What is IFRS 16?
And how does it affect me?
IFRS 16 is the new Accounting Standard for Leases, from the International Accounting Standards Board.
It changes how you must account for all leased assets, and it comes into operation on 1st January 2019.
For those of you who occupy property (as a lessee), or account for those who do, the greatest impact on your accounts will likely be from your property leases.
These must now must be recognised as a liability and a right-to-use asset on the Balance Sheet.
Trace’s complete solution
Our systems can now deal with the complex challenge of calculating the liability and right-to-use asset value on a property lease.
The new IFRS 16 functionality is fully integrated into the core Trace Solutions property management systems and naturally, it specialises in property leases.
Our solution automatically calculates the liability and right-to-use asset value of each occupational (head) lease from information already stored in your Trace Solutions property database.
The liability is valued on the Discounted Cash Flow basis.
For existing leases, the system can automatically calculate the transition on either the:
Full retrospective basis
calculating from the start of the lease
Modified retrospective basis,
at the transition date
with either asset valuation option
The transition calculation takes account of historic rent reviews.
If you grant sub-leases (‘leases’ in Trace core systems) over a substantial part of the occupation, this affects the right-to-use asset and changes the accounting.
The Trace Solutions software handles this special facility within the IFRS 16 property software and reporting.
Periodic financial reports
The periodic financial report performs the liability amortisation and the asset depreciation calculations. It provides:
Asset depreciation figures for the Profit & Loss account
Opening and closing balance figures for the Balance Sheet
The report shows revaluation adjustments with supporting reasons (such as a rent review) and detailed supporting calculations.
The system also supports variable length periods.
Detailed audit reports support all valuations and transition calculations and can be checked before finalisation. The discount rate can be set at lease level. The lease history can be checked and confirmed against external records if required.
The Trace IFRS 16 solution is now live. Clients with a login can read the release notes here.
If you’d like a demonstration, or want to discuss IFRS 16 in more detail, please call us on 020 7825 1299. Existing clients should contact their Account Manager.