International Financial Reporting Standards (IFRS) is the international accounting framework within which to properly organize and report financial information. IFRS was established by the International Accounting Standards Board (IASB) to create a common set of rules, ensuring financial reporting is consistent, transparent and comparable globally.
Do I need to comply with IFRS?
As a common accounting language, IFRS is currently the required accounting framework in more than 120 countries. IFRS requires businesses to report their financial results and financial position using the same rules; this means that, barring any fraudulent manipulation, there is considerable uniformity in the financial reporting of all businesses using IFRS, which makes it easier to compare and contrast their financial results.
What is IFRS 16?
IFRS 16 is the accounting change which effectively puts all leases, both operating and finance, on the balance sheet as an asset and a liability. This change became effective Jan 19.
What does this mean?
There's been a long-held belief that operating leases were always just an expense. As a result, often this wasn’t shown on a company’s balance sheet. Therefore, many felt this was a distortion of your balance sheet because you would still have an inherent obligation to pay for a lease that wasn’t actually listed. Now, this has been amended to create visibility of leases across your balance sheet.
How do I know if IFRS 16 applies to my organisation?
For most organisations, if you are turning over revenue of over AUD$30 million, you would need to adopt IFRS accounts. It is important to note there are different limits in different countries, however; if you have reached the threshold and are using IFRS accounts, you will need to comply with IFRS 16.
How do I manage this IFRS 16 accounting change?
With the introduction of IFRS 16, you may be on the lookout for a better way to manage your operating leases on the balance sheet to ensure compliance. The most efficient way is to introduce LOIS.
What is LOIS?
LOIS refers to Quadrent’s Lease Optimization Information System, which is a fully integrated portfolio and asset management tool for all your IFRS16 lease accounting compliance. We operate it under a master agreement. Plus, we're the only supplier in Australasia.
If you're interested in understanding more about IFRS 16 Compliance and LOIS, here are a couple of resources we can provide:
- Read about LOIS features and benefits and the clients that are already onboard with us
- Explore the pros and cons of using spreadsheet applications such as Excel for the transition to IFRS 16 with this short whitepaper (15 minute read).
- Let our recent survey results from LOIS customers demonstrate the value of the product (3 minute read)
- Understand the pros and cons of leasing business assets with our whitepaper (15 minute read).