Assessment of the Lease Term
Lease term recognition
The Soft4Lessee system helps to assess the lease term, taking into account:
- the contractual lease term
- the non-cancellable period
- lease renewal/ lease extension options the lessee is reasonably certain to exercise
- early termination options the lessee is reasonably certain to exercise
The estimated term becomes the base term lease liability calculation (the PV of the future payments over the term). The circumstances may change and the lessee may re-assess the lease extension or termination option at any point in time; the system will make a re-measurement to the lease liability accordingly.
The depreciation term for right-of-use would equal the estimated lease term (if the lessee does not get title of ownership to the asset at end of lease). In the case of a re-assessment of the lease term, the depreciation term will change in parallel (subject to ownership).
Managing the lease term
Re-measurement is the process of re-evaluating the asset value or foreign currency on a company’s financial statements. There are several scenarios where a re-measurement is required. Asset re-measurement allows the lessee to have more accurate records on the balance sheet and may allow a deductible loss to be taken.
What you can do with Soft4Lessee?
Manage your transition to IFRS 16/ ASC 842 standard without a headache
Import and export to/from other systems, using one of the following methods (or combination of methods): webservice, Excel files. Soft4Lessee can interface with other asset management, contract management systems, the general ledger system, and the management reporting system.
Have a database of your lease agreements, with three major statuses – new agreements under consideration, active leases, and archived leases (expired, or terminated early). Import data from Excel sheets or populate data via webservice.
As circumstances change, the system can calculate adjustments to lease liability and right-of-use asset value, and produce G/L postings accordingly.
Get ready reports which you need for your financial reporting and prepare additional information for IFRS 16 disclosures.
Calculate lease liability as the present value of lease payments, and the present value of amounts due at the end of the lease term, considering purchase or termination options. The system will automatically adjust lease liability as the circumstances change.
Calculate RoU Asset value considering lease liability, costs before lease commencement and the expected cost of asset return (e.g. costs of equipment dismantling, costs of restoring leased premises). If the lease liability is re-assessed, the RoU asset value changes accordingly.
If you have a composite contract that includes leases and services, the non-lease component is separated and posts to the operating expense account, separately from interest expense and asset depreciation expense, as required by IFRS 16.
The system allows lease modifications after the commencement date and will calculate the impact on lease liability and right-of-use asset. The system will produce G/L postings to reflect any lease modification.
Track leases by numerous statuses – under consideration, active, archived, requested, quoted, signed or withdrawn, activated, extended, early-terminated, buy-out, expired.
If you have leases with variable lease payments dependent on an index (like the Consumer Price Index) or reference interest rate (like LIBOR, EURIBOR), the system is able to calculate re-pricing and reflect it in accounting, as per IFRS 16 requirements.
Have required G/L transactions at each due date and at the end of the accounting period. You can download G/L transactions in detail or at summary level and feed them into your general ledger system via webservice integration, or via an Excel.
Determine lease term by a number of circumstances – whether you are reasonably certain to execute the purchase option, or extension option, or terminate the lease before the end of the term.
For purpose of comparison and impact analysis, Soft4Lessee can calculate and post to General Ledge expenses as per previous IAS 17 standard. This can also be used in scenarios, when IFRS 16 applied at group consolidation level.
If you have tens or hundreds of subsidiaries and account for leases per each legal entity, some functions can be run over multiple „companies“ in Soft4Lessee.
Accounting Standards
Select the lease accounting standard
Under IFRS 16 businesses with large portfolios of operating leases will be impacted by the change in IFRS 16 lease accounting standards, as the new standard require lessees to recognize assets and liabilities arising from operating leases on the balance sheet. Get ready to meet the requirements and stay compliant with the standard with Soft4Lessee.
US GAAP standard ASC 842 will comes into effect on 1 January 2019. Companies, having large portfolios of operating leases will be influenced by this change as the standard requires all assets and liabilities regarding operating leases be presented on the balance sheet. Get ready to meet the requirements and stay compliant with the standard with Soft4Lessee.
AASB 16 introduces a single lessee accounting model requiring lessees to recognize all leases on the balance sheet, except for short-term leases and leases of low-value assets. This Standard applies to annual reporting periods beginning on or after 1 January 2019. AASB 16 is equivalent to IFRS 16 with extra paragraphs on Leasing Treatment for Non-Profit Entities. Stay compliant with the new standard with Soft4Lessee.
Winning Customers' Trust Across the Globe
“By comparing several providers we decided to choose SOFT4Lessee. SOFT4 offered customized solutions while the team was always responsive and dedicated to meet our requirements from the start. The system itself we find quite intuitive and the features cover all our needs.”
“It was a pleasure to work with Soft4 team. The project went very smoothly and the time schedule was perfectly met. All Soft4 contact persons were very friendly, helpful and had a good expertise regarding IFRS 16 accounting rules. Furthermore, we like to highlight the short response time, which is very helpful during the implementation period.”
“It has been so nice working with the Soft4 team on the Vietnamobile project, from the contract negotiation to the Soft4Lessee system implementation so far. Our Vietnam team finds Soft4Lessee is very helpful and efficient in executing the implementation, particularly Linas who has been helping us solving many practical issues throughout the implementation. As to the product, the Soft4Lessee solution plus some additional features added to the system for local requirements, satisfies our needs for this new accounting and reporting compliance.”
“We chose Soft4 and Soft4Lessee because, currently, we are using Microsoft Dynamics 365 as our financial tool for reporting and Soft4Lessee is set up on the same Microsoft Dynamics platform, so we thought it was going to be easy for any future interface/integration. Soft4Lessee is great, user-friendly and very cost-effective which can fulfill our requirements. We are very happy with the Soft4 team, they are very polite, friendly, cooperative and they helped us through the data setup process without any trouble.”
“During our evaluation process, we found SOFT4Lessee as the most matured product in comparison to others. It was suitable for us to start our journey into IFRS 16 compliance. The user friendliness, easy navigation, compatibility with Excel – all add to the nice end-user experience. The SOFT4 team is very knowledgeable, not only on the product but on the IFRS16 standard as well. They have been very professional in all their deliverables. We would like to acknowledge Linas for his contribution and support whenever we needed.”
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