The implementation of IFRS 16 represents a major challenge for companies, particularly in terms of lease management and related accounting. This new regulation requires them to record the majority of their lease contracts on the balance sheet, both for leased assets, which are now considered assets, and for future rental commitments, which are now liabilities. JD Edwards offers robust functionality to manage this transition, including contract management, asset/liability calculation and compliant reporting.
What is IFRS 16 ?
IFRS 16, which comes into force on January 1, 2019, radically changes the way leases are accounted for in financial statements. It requires companies to recognize the majority of leases on their balance sheets, both for leased assets (assets) and future lease commitments (liabilities).
Main changes
Recognition of assets and liabilities
Companies must now recognize an asset for the right to use the leased asset and a liability for future lease payments.
Impact on the balance sheet and income statement
Rents are replaced by depreciation and interest, which modifies traditional financial indicators.
Detailed information
More detailed information on leases must be provided in the notes to the financial statements.
Using JD Edwards to implement IFRS 16
Basic functions
JD Edwards offers robust functionality to manage the requirements of IFRS 16. These include contract management, calculation of lease assets and liabilities, and reporting in line with the standard.
Specific modules
JD Edwards has specific modules that can help meet the requirements of IFRS 16:
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Asset Lifecycle Management
Enables leased assets to be managed throughout their lifecycle.
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Financial Management
Manages accounting and financial aspects, including depreciation adjustments and interest.
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Lease Management
Dedicated module for lease management, ensuring compliance with IFRS 16.
Implementation process
Lease analysis
The first step is to analyze all existing leases. It is crucial to identify which contracts fall within the scope of IFRS 16.
JDE configuration
Contract setup
Set up leases in JD Edwards, entering information such as duration, payments and renewal conditions.
Calculation of assets and liabilities
Use JD Edwards tools to calculate lease assets and liabilities based on future payments and discount rates.
Depreciation and interest
Configure the calculation of amortization of lease assets and interest on liabilities.
Report management
JD Edwards enables you to generate IFRS 16-compliant financial reports, including the necessary notes. These reports can be customized to meet your company’s specific needs and ensure total transparency.
Data security and compliance
Ensure that lease data is secure. JD Edwards offers advanced security features, including data encryption and access management.
Regulatory compliance
JD Edwards is designed to help companies remain compliant with current regulations, including IFRS 16. Regular software updates ensure that functionality remains compliant with new regulatory requirements.
Technical support and training
Responsive technical support and comprehensive training options, including webinars and live training sessions, are essential for a successful transition to IFRS 16 with JD Edwards.
Conclusion
Compliance with IFRS 16 is a complex but essential step for companies. JD Edwards offers comprehensive solutions to facilitate this transition, integrating lease management and ensuring compliance with the new accounting requirements. By following a structured approach and taking advantage of JD Edwards’ advanced functionalities, your company can not only comply with IFRS 16, but also optimize its financial and operational processes.
At BHI Consulting, we’re here to support you every step of the way. Contact us for personalized advice and to find out how we can help you implement IFRS 16 with JD Edwards in your company.
