Leasing assets instead of purchasing them outright is a common business model… It sometimes even serves as the lifeblood of many retail and service businesses, doesn’t it? Whether you’re a bank with branches across the country, an insurance firm with regional offices or a restaurant chain with outlets up and down the highways and malls. Yet, lease accounting has traditionally been fraught with manual work, compliance pitfalls and fractured data!
Enter automation: the game-changer that’s transforming how companies manage their leases under global standards like IFRS 16 and India’s Ind AS 116.
So… What Is Lease Accounting?
At its core, lease accounting is the process of recognizing and reporting leases on your financial statements. Historically, many “operating leases” stayed off the balance sheet under older standards, obscuring a company’s true financial obligations.
The international IFRS 16 & Ind AS 116 (India’s equivalent) mandate that nearly all leases be recognized on the balance sheet as a “right-of-use” asset and a corresponding lease liability.
This shift enhances transparency-investors and regulators can now see both your leased assets and your future payment commitments.
For multi-site operations, this means hundreds or even thousands of leases must be tracked, measured and reported accurately every accounting period! Sounds like a hassle? It can be… But stay positive, there’s always a solution!
Automation in Lease Accounting
Let’s give an Intro to Automation Tools
Manual lease tracking, with spreadsheets, PDFs and email threads simply can’t keep pace with today’s reporting requirements. Automation software centralizes all lease data in one platform, applying the complex calculations that IFRS 16/Ind AS 116 demand.
Key Benefits of Automation:
Speed & Efficiency
- Automatic extraction of lease terms (start/end dates, payments and renewal options) eliminates hours of data entry.
- Instant recalculations when lease terms change or rates fluctuate.
Accuracy & Consistency
- Built in compliance with IFRS 16/Ind AS 116 ensures standardized calculations of lease liabilities, right-of-use assets, interest expense and repayments.
- Audit trails document every change, supporting your internal controls and external audits!
- Share data on a ‘need to know basis’ by configuring access controls
Comprehensive Reporting is the Way Forward
- Pre-configured reports for balance sheets, income statements and cash flow statements.
- Scenario analysis (e.g. “what if we exercise that five‑year extension?”) in no time!
Scalability
- Add new leases, whether ten retail outlets or twenty corporate offices… All goes without ballooning your finance team’s workload!
- Cloud-based platforms ensure real‑time access for stakeholders across locations.
Future Readiness
As interpretative guidance & best practices evolve, automated solutions update their compliance logic centrally, so you never have to scramble with manual policy changes again!
Looking Ahead
The rise of machine learning promises even smarter lease accounting! That comes with auto-recognition of lease clauses in contracts, predictive analytics for renegotiation strategies, integration with ERP and property management systems, and all sorts of other features for seamless workflows!
Teaser: WOFR’s Upcoming Lease Accounting Service
At World of Financial Reporting (WOFR), we understand the challenges retailers face when managing dozens or even hundreds of leases under IFRS 16 and Ind AS 116. That’s why we’re gearing up to launch our lease accounting automation service, versatile lease accounting automation solution, tailored for businesses of all sectors and sizes.
Our upcoming solution will:
- Consolidate all your lease contracts in a single, secure platform
- Automate the heavy lifting of complex lease calculations and journal entries
- Deliver instant, audit-ready reports that align with global and Indian accounting standards
Stay tuned… WOFR will soon empower you to turn lease compliance from a burden into a strategic advantage!
