“ID – Management technologies” LLC prepares tenants to new IFRS standard with regard to lease accounting

“ID – Management technologies” LLC implements the SAP ERP – RE FX module updated by SAP according to standard IFRS 16 “Lease”. This new IFRS standard regarding lease accounting becomes effective on January 1, 2019. First of all, changes affect tenants (cimpanies) of real property in case they perform accounting by IFRS.

Accounting procedures change for tenants: eliminated discrepancy between financial and operational lease. From the entry-into-force of this new standard, assets and financial liabilities in terms of lease payments are subject to recognition. Now tenants can request landlords to specify information in more details in a contract and related documents, and in terms of sub-lease of real property and sales operations accounting for leaseback. Therefore, changes also affect landlords.

SAP prepared their users to this new standard IFRS 16 “Lease” and updated the ERP module called “Flexible real property management” (RE-FX). New module presumes capability to display all required transactions in various sides of evaluation. Separate screens are for IFRS features of real property contract management including all required parameters for lease accounting in accordance with requirements of the IFRS 16 “Lease” standard.

“Companies with substantial part of business operations related to real property must make changes in accounting policy and organize information collection process in terms of real property objects in lease”, says Viktoria Lebedeva, Director of SAP practice at “ID – Management technologies” LLC. Probably is also requires to negotiate contractors in terms of contract information so that it is sufficient for requirements of this new IFRS standard. This SAP module allows correctly accomplishing all new requirements for lease accounting in accordance with IFRS 16 “Lease” standard”.

According to “ID – Management technologies” LLC estimates, the time required to switch to this new IFRS standard, first, depends on company scale, its geographical distribution, and complexity of accounting system. Apart from preparation of standard-required data and lease contracts, current SAP users also need to presume functionality testing stage after installation of the module updates.

Cost of license for updated SAP module is regulated by vendor and depends on number of users in case of deployment for a tenant, and depends on number of commercial lease objects in case of deployment for a landlord.