Largest challenges for businesses, posed by the new AASB 16 accounting standard
Compliant books are very important. If your accountants aren’t able to take care of matters in a way to keep accounting compliant, your company can go into hot water. But, as with every area, accounting standards like the AASB 16 does create a heap of challenges. The all-new accounting standard, introduced in 2019, has eliminated the discrepancy between operating leases and finance leases. With that being said, AASB 16 leases are becoming a much more significant burden for bookkeepers. Let’s look at the areas where AASB 16 lease accounting creates the most difficulty and which solutions are the optimal ones in these areas.
Much more intense data gathering with AASB 16
Since accounting is all about data gathering, processing and transposition, accountants have to have the technical capabilities to handle large quantities of numbers. This requires both modern hardware and/or software solutions. Luckily, when a software is launched on the cloud, the need for capable hardware becomes pretty much non-existent. With that being said, AASB 16 lease accounting imposes a new necessity for businesses to re-check their books and re-do their balances as well as change the way they do lease accounting in the future.
As an example, we can say that there will no longer be the packing up of lease and non-lease expenses which we saw with previous standards imposed.
In short, the larger the company, the harder it becomes to do quality accounting for leases. As the volume of documents increases, so does the immense necessity to track many more metrics and numbers, related to each individual lease as well as the whole lease portfolio of your department and/or organization. Luckily, software solutions which we mentioned (cloud-based) can help simplify this problem by a whole lot.
More benefits from software
With the increased complexity of the AASB 16 accounting standard for leases, companies are beginning to rely more and more on modern digital software solutions. A very small minority consider reliance on computerized tools a weakness, but in the context of administrative, day to day bookkeeping tasks, this can be also viewed as a godsend. Digital software solutions can help reduce time spent on completely bureaucratic tasks which don’t create any added value significantly. For example, crunching down numbers and adding totals with old school paper documents and a simple calculator could take hours upon hours more time than when compared to a dedicated software solution with integrated calculators.
For the AASB 16 accounting standard specifically, SOFT4Lessee has the technical capabilities to support both small, mid-sized and even large businesses. Every company can benefit from the automatic, compliance-ready set of templates and calculators. Instead of bothering your staff with time-intensive tasks which don’t create any added value, avoid the headache and utilize easy-to-learn AASB 16 software from SOFT4Lessee.
Other departments sometimes need to get involved
It’s a common misconception that accounting has to deal with their problems alone. Actually, in many organizations, administration, finance and some other departments may work very closely together. By working together, departments can communicate better and improve data exchange which is crucial for proper AASB 16 lease accounting. This leads us back to the very first point which we’ve touched upon. Companies and accountants have their hands full, trying to cope with the increased burden of gathering new data and keeping track of new metrics.
Thus, exchange of information between finance, sales, other relevant teams, and accounting is crucial in order to efficiently generate reports or keep the accounting process running smoothly, without delays, disruptions, etc.
Retraining and preparing the staff
There are two sides to every new technology or standard that needs to be implemented or used. The first side is technological. For the AASB 16 standard, the technological side is completely covered by dedicated software. It has all of the needed bells and whistles to cover everything from A to Z which is related to modern-day lease accounting, according to the newest standards.
The second side is human. This is much harder to manage because team leads not only have to introduce the new technical solutions and organize training but sometimes even spend time trying to convince personnel why the switch is necessary and/or beneficial. Hence, we can see a lot of companies sort of stuck in No man’s land. What we mean is that many organizations are struggling to cope with the increased administrative burden of the new standard due to the fact they ignored the necessity to train their staff and now they can’t afford to let someone go to training because there aren’t enough competent accountants on board…
So, to sum up – what are the biggest challenges posed by the introduction of the AASB 16? Well, first off, the line, splitting operating and financing leases, was eliminated. This created the necessity for companies to keep more numbers about each and every lease as well as their lease portfolio. An increased demand for data gathering pushed companies to search for adept and up-to-date software solutions like SOFT4Lessee. Because they were pushed towards the software, businesses became more reliant on it, utilizing every single function and saving more and more time, automating day-to-day processes, etc. Finally, with the introduction of the new standard, as accounting became more challenging, a lot of organizations also began emphasizing the inter-department communication to ensure accounting of leases won’t lag behind.