Report | 2020 APAC Lease Accounting Progress Report Survey

By March 6, 2020 Australia, Research
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2020 APAC Lease Accounting
Progress Report Survey

IFRS 16 Market Adoption Across APAC Organisations

Implementing the current lease accounting standard, IFRS 16, has likely been one of the more challenging and surprisingly complex projects that your finance and accounting teams have faced in recent times.

In an effort to better understand market adoption and track current progress, we ran a market survey across the APAC region.

Insights include:

  • IFRS 16 adoption levels across the APAC region
  • Key benefits organisations are experiencing, beyond compliance
  • Focus areas for 2020

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Learn how other organisations plan to approach:

  • The top challenges to compliance
  • The lease accounting project team
  • Achieving benefits beyond compliance
  • 2020 and beyond

Compare your organisation to others in the market in terms of:

  • Lease portfolio size
  • Less project status (pre-adoption or post-adoption)
  • Level of complexity compared to revenue recognition
  • Top challenges

Tracking changes to the lease portfolio will be the greatest challenge going forward.

In our May 2019 survey, we advised that project teams should implement long-term business processes, policies, and controls to ensure that their lease accounting remains accurate after day-one. Day-one compliance is considered the beginning of the lease accounting and lifecycle management journey, not the end.

In our recent study, this has been recognised by participants as the biggest challenge, with 68% selecting tracking changes as one of their top challenges on day-two. Over half (53%) indicated that improving lease administration processes to track portfolio changes is a key focus for 2020.

The primary objective for controllers must be to ensure a reliable, repeatable, and accurate global close process that works well within existing month-end close time frames, and does not strain human capital beyond their limits. This process must now occur in the context of compliance with the new lease accounting standards. Initially, many firms thought that compliance would simply be a question of applying known calculations against the data in their lease portfolio. Depending on the state of their data, this was indeed the case for many in achieving initial day-one compliance.

But as we’ve seen, these organisations are now finding that maintaining the completeness and accuracy of this data is an extremely complex process of considerable scale. We estimate that the average lease portfolio is modified between 25 and 50 percent each year due to numerous regular changes to lease contracts and underlying assets that can materially affect the reporting required by the regulations. Many of these changes can only be accounted for by communicating with all of the lease owners and asset users across the organisation. What’s more, once these changes are recorded, they must be analysed, the proper judgements and decisions applied, and any resulting changes booked into the system with applicable audit support. In order to properly adhere to corporate governance goals, these judgements and decisions must be applied consistently based on strict policies and controls.