IFRS 16 Telecoms industry

IFRS16 and the Telecommunication industry

By Antonia Churcher May 14, 2018 2:44:08 PM

The telecommunication industry is thought to be amongst one of the most affected sectors. The IFRS16 new accounting standards are nearly here and there is little time to prepare, but we are here to help.

Our leasing experts have compiled this easy-to-follow, comprehensive guide on how telecoms businesses will be impacted and the steps they can take to be compliant, prepared and reduce the cost of transition to IFRS 16:

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Telecommunications entities will be particularly affected as those within the industry tend to lease a substantial number of big-ticket assets that are likely to be captured by the scope of IFRS 16, such as: network towers and equipment, satellite transponders and fibre optic cables

HOW TELECOMMUNICATIONS ENTITIES WILL BE IMPACTED:
  • Significant number of operating leases in common
  • Large number of big ticket assets under lease
  • No current lease management system in place will complicate transition
  • Difficulty in identifying lease agreements due to common asset/contract types
  • Difficulty in separating lease and non-lease components of contracts
  • Various complex assets to identify
  • Numerous departments across many geographies makes it difficult to centralises all leases
  • Potentially significant impact on balance sheet and finance agreements

Research conducted by Deloitte indicates that, combined, the world’s largest 50 telecoms operators could potentially see as much as $125 billion of current operating lease commitment disclosures be added to balance sheets in respect of right-of-use assets.

Spreadsheet accounting is not a suitable solution for the transition to IFRS 16, as highlighted by the large auditor firms. Many telecommunications entities are exploring the benefits of lease accounting software as the most cost effective way to centralise their leases, run the required internal and external accounting reports and improve their lease management efficiency and savings.

The deadline for IFRS 16 implementation is fast approaching. Lease accounting software will considerably reduce the burden of transitioning to IFRS 16 and provides many more lease management savings and reporting capabilities as well. To find out more about how lease accounting software is designed to improve your businesses leasing.