IFRS 16: What It Is, Why It Matters and Why It’s Mandatory

October 24, 2019

Preparation is a process – understand the steps

If your company reports under the International Financial Reporting Standards (IFRS) and you have leases, the introduction of IFRS 16 affects you. Starting this year, you will have to recognize, measure, present, and disclose your leases as liabilities on year-end balance sheets. For businesses with over 20 leases, this will require a lot of time.

One of the main reasons for the change was to make lease assets and liabilities more transparent. The old system allowed companies to recognize their leases off their balance sheets. This made it difficult to get an accurate picture of their financial position.

If you’re not ready for IFRS 16, you’re running out of time

The change came into effect on January 1, 2019, which means you have to adjust your balance sheets accordingly for your 2019 year-end. The risk in waiting is either higher audit fees for adjusted journal entries at year-end from your auditor or your team scrambling to make those adjustments before the auditors start their work. But get moving because it’s a process.

You can either do it on your own, or outsource it to BDO:

If this seems daunting to you, you’re not alone. We can help take care of all of your IFRS 16 needs so you don’t have to go through the above in-house process at all.

Contact BDO for a consult or to learn more about our lease accounting services.