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12/07/2017

IFRS 16 – Not a revolution, but a breath of fresh air for digitisation

The new IFRS 16 Accounting Directive is causing uproar at companies. They are finding themselves confronted with huge challenges for aligning themselves properly with the current standards. A recent study by PwC confirms this assessment of the sentiment, but also accepts that there will be various positive effects on digitisation in the companies.

IFRS stipulates that companies must record, inventory and report their entire assets and liabilities for all lease agreements. Additional administrative expenses and possibly further costs are to expected, especially for major corporations that have leased a large number of properties but do not regard the management of such buildings as part of their core business. According to this recent PwC study, only one fifth of the surveyed companies know the precise number of their existing leases. This is precisely the area where the affected companies fear the greatest challenges will arise due to the introduction of IFRS 16 – in acquiring and preparing the necessary data, such as rent levels, rent periods, etc.

In many cases, there is still a lack of suitable system support for technically mapping the lease business. There are often contracts in varying forms, and many work steps are still performed manually. Excel is not particularly suitable for taking an inventory. More than half of the survey participants have come to the same conclusion.

Digitisation receives a second wind

These weak spots are practically crying out for digitisation. The vast majority of the survey participants agreed: 81% judged the potential to be high, and none of them doubted the influence of digitisation. On the one hand, the companies anticipate added value through the reduction of interfaces and the automation of procedures and, on the other hand, they hope to improve and homogenise the data management mentioned above. Over a half of the companies can see positive effects on the technical, IT mapping of agreements overall.

Drive digitisation forward with SAP and PROMOS

The introduction of the SAP® module RE-FX offers a wide range of possibilities for mapping existing lease agreements effectively and providing the necessary data on lease periods and conditions at the press of a button. The SAP® integration also guarantees the further processing of the data in other SAP® modules in the field of finance and controlling. As a long-term partner of SAP®, PROMOS provides support for individual introductions and also possesses numerous additional functions and reports.

If you are also grappling with the implementation of the new Accounting Directive, we would be glad to advise you!
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Background information on the study:

The current study results come from a survey by PwC, which was carried out in the spring of 2017. 16 companies in total were asked about the current situation and the effects of the IFRS 16 Accounting Directive. You can find further information on the study here.

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