Lease accounting under IFRS 16 is essential but can be complex and time-consuming, especially when managing inconsistent lease payments, calculation for depreciation, interest accretion and adjustment for interest accruals etc. For many accountants, manually managing these processes creates challenges, often leading to inefficiencies and inconsistencies.

**The Challenge**

Accountants faced significant hurdles in managing lease accounting. Key issues included:

- **Inconsistent Lease Payments:** With varying payment schedules, rent-free periods, and escalation clauses, maintaining consistency in calculations was challenging.

- **Manual Discounting & Amortisation:** Calculating discounting, lease amortisation, and interest accretion manually led to errors and inconsistencies.

- **IFRS 16 Compliance:** Ensuring calculations and schedules complied with IFRS 16 lease accounting standards was time-consuming and complicated.

- **Efficient Journal Entry Preparation:** Preparing and reviewing lease journal entries every period was labor-intensive and prone to manual errors.

**The Solution**

To address these pain points, we developed the Lease Accounting Template — an automated solution to streamline and simplify lease accounting. The template is designed to automate complex calculations and prepare journal entries, ensuring compliance and saving accountants considerable time.

**Key Features:**

**1. Automatic Management of Inconsistent Lease Payments:** Handles complex payment schedules with ease, including rent-free periods and escalation clauses.

**2. Accurate Depreciation & Interest Accretion:** Calculates depreciation and interest accretion daily, providing precision and consistency in reporting.

**3. Implicit Rate Calculation:** Automatically computes the implicit rate when the cash value of the lease is known, reducing guesswork and improving accuracy.

**4. Interest Accrual Adjustments:** Adjusts interest accruals for periods that don’t align with calendar months, ensuring alignment with accounting standards.

**5. Automated Schedules:** Creates easy-to-follow schedules for lease liabilities and Right-of-Use (ROU) assets, simplifying the lease accounting process.

**6. Auto-Populated Lease Journal Entries:** Prepares journal entries in the required format, reducing redundant entries and potential errors.

**Our Results**

With the Lease Accounting Template, our clients have been able to:

**Reduce time spent on lease accounting** by automating key calculations and journal entries, allowing teams to focus on high-value tasks.

**Improve compliance with IFRS 16**, ensuring that lease schedules and journal entries align with accounting standards.

**Enhance accuracy and consistency**, minimising the potential for errors in calculations and entries, leading to a smoother month-end close.

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How to make lease accounting more efficient?

How to make lease accounting more efficient?

Written by Mike