New IFRS 16 accounting standard, immediately available solution

Although it may seem like just another accounting difficulty, “IFRS 16: Leasing” is the effect of collaboration of the International Accounting Standards Board and the Financial Accounting Standards Board. The purpose of these organisations was to optimise and eliminate the differences in the areas of operating and finance leases of different countries. The new standard will affect the statements of lessees regarding the inclusion of lease agreements in the books. Every lease, including operating lease, will be regarded as a finance lease agreement (excluding the exceptions described in the standard). This means that the balance sheet of organisations is going to carry new assets. In other words, the lease agreement will no longer be a cost – it will become a liability carried on the asset side of the organisation.

Problem with real estate

The problem with the change in accounting rules will also affect businesses and organisations that lease real estate, both owned and rented. This means that companies that lease spaces will have to use a different method of carrying operating lease agreements. This is where SAP comes to aid with the RE-FX solution. Although the module has already been well established on the market for 10 years, this major change did not go unnoticed by the developer, and, in September 2016, a new note was issued to cover “IFRS 16 Leasing” using RE-FX. The added function of the solution enables the object to be combined with the asset, which meets the accounting requirements. With automatic accounting, it will be possible to keep accounts according to IFRS and US GAAP standards and national regulations using a single operation.

Is RE-FX a solution with future potential?

One could ask: why buy the entire RE-FX module if you only need the additional functions relating to lease agreement posting? However, SAP Flexible Real Estate Management does not only handle lease agreements. It also has a large number of convenient functions that can come in handy during the next stage of development of your organisation:

•  The option to present the full portfolio of real estate, already owned or to be acquired, complete with the information relevant from the business perspective assigned to the individual real estate.
• The option to represent lease agreements, agreements related to the purchase of utilities, real estate tax, perpetual leasehold, real estate management, deposit management and many others.
• Searching for real estate that meets specific criteria and creating related offers.
• The corporate use of real estate by reserving premises, planning relocations and assigning workplaces to employees.
• The function of mass adjustment of fees by the value of statistical indicators (GUS, HICP, MUICP, etc.).
• The option to correlate the fees with the amount of recorded turnover.
• Supporting the determination of additional costs.
• Monitoring of payments and agreements.
• Integration with CAD systems.
• One-time correspondence forms (notices) and cyclical correspondence form (invoices, revised invoices).

What starts bad, ends well?

Tenants will be the ones most affected by the changes, but any organisation may have to deal with agreements that require the new accounting rules. Implementation of the SAP RE-FX module at the organisation is worth considering in order to improve the accounting of long-term agreements and valuable leases in advance, particularly as every implementation process takes time, and this change should be introduced with due care. In time, this will result in better financial management, giving companies a chance to increase the turnover on their business operations.