In the world of business and finance, change happens quickly. There’s no time to get complacent. New technologies are introduced regularly, modern solutions replace outdated ones, and regulations evolve just as fast. A perfect example is the AASB 16 lease accounting standard. This standard primarily affects larger entities with significant operating lease responsibilities, making compliance and efficiency critical throughout the transition and beyond.

In this article, we explore the benefits of implementing software solutions for AASB 16 compliance and why they are essential for your organization.

AASB 16 brings new demands for data management

Previously, the distinction between operating and finance leases was clear. However, under AASB 16, this distinction has been removed. Lessees are now required to recognize almost all leases on the balance sheet. This adds substantial administrative and accounting work, including the need for increased data collection, management, and reporting.

The most effective way to meet these new requirements is by using dedicated lease accounting software. Custom-built solutions can be expensive and time-consuming to develop, and free tools rarely provide the necessary functionality. That’s why purpose-built platforms like SOFT4Lessee offer the best approach. With its Microsoft Dynamics 365 Business Central-based interface, your team benefits from a user-friendly system that supports a seamless transition and efficient lease data management.

Poor implementation increases risk

Some critics of AASB 16 have raised concerns about the increased workload and potential pitfalls of the standard. However, our experience and user feedback show that, with the right tools and processes in place, lessees have successfully managed the transition and adapted to the new requirements.

That said, it’s important to be aware of the potential risks that come with improper implementation. These include:

• Inaccurate liability accounting and misstatements in working capital

• Unexpected changes in financial metrics such as EBITDA, which can affect financial analysis and decision-making

• Inconsistencies in reporting and the risk of overvalued assets

• Weaker communication with financiers, especially for businesses not proactively managing their compliance process

The benefits of AASB 16 outweigh the risks

While AASB 16 introduces more responsibility, it also brings significant benefits. Despite initial concerns, leasing continues to be a preferred financial model for many businesses. The core advantages of leasing — such as flexibility, cost management, and access to assets — remain intact under the new standard.

Some of the ongoing benefits include:

• Favorable tax and asset management treatment

• No change to the cost spread over the lease term, which limits cash flow disruption compared to asset purchases

• Continued access to the right to use assets without the full financial burden of ownership

• Faster access to modern equipment and technology, with improved cost-effectiveness

Leasing remains a valuable tool for business growth. The primary area that demands more attention is lease accounting itself, and that’s where AASB 16 requires businesses to step up.

A one-stop digital solution for lease accounting

As discussed earlier, the best way to manage lease accounting under AASB 16 is by using purpose-built software. SOFT4Lessee is one such solution — a robust, feature-rich tool designed specifically for lease accounting under IFRS 16, ASC 842, and AASB 16.

Here’s how it can streamline your operations:

• Easy data import and export. Whether working with Excel, XML, or other file formats, SOFT4Lessee allows smooth integration with external platforms.

• Effective lease agreement management. The system helps you sort, categorize, and organize large volumes of lease documents quickly and efficiently.

• On-demand reporting. Generate reports, charts, and visualizations whenever needed. SOFT4Lessee is designed to prepare comprehensive AASB 16 disclosures and reports with minimal manual input.

• Management of non-lease components. If your lease agreements contain both lease and non-lease elements (common in composite contracts), the software helps identify and separate these for proper accounting.

Final thoughts

AASB 16 has changed how lease accounting is handled, but it doesn’t have to complicate your operations. With modern, specialized tools like SOFT4Lessee, businesses can confidently navigate the new standard, remain compliant, and continue benefiting from the leasing model.

If you're preparing for AASB 16 compliance or looking to improve your current lease accounting process, now is the right time to consider a digital solution that makes the entire process easier and more reliable.