IFRS 16 Compliance in Australia and New Zealand

As we pass the financial year-end for many organizations across Australia and New Zealand, finance leaders are reflecting on the lessons learned and key decisions of the past 24 months. Achieving compliance with IFRS 16 was a catalyst for change within many organizations, motivating them to embark on digital finance transformations, using automation to deliver end-to-end process improvements and cost savings.  The recent COVID-19 situation has amplified the need for organizations to preserve cash, forcing finance chiefs to look for new ways to improve the stewardship of capital.

Although the AASB 16 and NZ IFRS 16 adoption deadlines are now in the past, most organizations are still looking to uncover the business value of their compliance journey. Our understanding of the standard evolved from it being an accounting problem, to a data and communications problem, and then a lease management problem, and finally a catalyst for business improvement, delivering significant economic benefits. The challenge that nearly every company is facing today is that the decisions they made in 2018 and 2019 were based on the understanding of the requirement at that time. And that is why we are seeing a significant global trend of companies reviewing their system needs in the light of how they can leverage the opportunity.

To achieve compliance, many organizations have automated a part of the lease lifecycle, but they are still facing challenges. Data governance and accuracy have become critical, and with so many competing priorities, many find it difficult to fully automate their leasing process and drive real ROI. During a recent webinar with LeaseAccelerator, PWC, Boral and King & Wood Mallesons, 81% of attendees indicated that the key lesson their organization learned from first time adoption is that access to accurate data is critical.

The following points were also highlighted by webinar panelists as lessons learned from the first reporting cycle;

• Consider a macro mindset – There are significant broader business decisions being taken by the organization which are impacted by this standard.
• Enable better stewardship of capital – Better use of accurate information can enable better decision making, such as Lease vs. Buy analysis etc.
• Focus on the opportunity – Make decisions around this standard with the big-picture opportunity for optimization and efficiency in mind, rather than the initial goal of compliance.
• Continue to evolve – Post compliance, take steps to consider better ways to drive outcomes, sustain long-term compliance, and optimise the process.