Sr. SAP Business Intelligence Associate
IFRS 16 & ASC 842: A quick overview of the new accounting standards
In 2016, the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) issued two new lease accounting standards, IFRS 16 and ASC 842, due to the lack of financial transparency on leases. Their predecessor, IAS 17, required companies to classify leases as either finance or operational leases, and only finance leases were to be reported on balance sheets.
If you are a lessor or a lessee and have not made a move to comply to the two new lease accounting standards, IFRS 16 and ASC 842, then the time is now! The effective date for IFRS 16 is January 1, 2019 and the effective date for ASC 842 is the fiscal year after December 15, 2018 for public companies. Companies will need time to rethink and modify their processes in keeping and recording their leases along with work with lessors to evaluate affected lease components.
How to prepare for IFRS 16 and ASC 842
If you’re looking for an all-in-one solution, NAKISA is the answer. It offers a complete solution for your lease accounting by providing a central platform for all leases, identifying lease types and capturing lease terms, and enables visibility of contracts. NAKISA can be integrated with SAP and is also a Solution Extension – this means it has been tested, validated, and is supported by SAP.
The specific product of interest is SAP Lease Administration by Nakisa, known simply as SLAN. Nakisa requires a license key but cannot be requested on SAP Marketplace using the standard process. You will need to submit a request for a license key by submitting a customer incident (refer to SAP Note 2003772).
Once implemented, companies will have to create new processes. For example, companies will need to come up with an agreed upon process on generating leasing IDs and set up their ERP systems accordingly. Additionally, companies can enter in all the current and new leases into SLAN. To expedite the manual process of entering leases, Nakisa offers a method to help with entering massive amounts of contract data into the application via Excel. Organizations implementing SLAN will also need to make sure to secure training for their employees on how to use the application.
For now, we will start by introducing the template for mass uploading of contracts.
Uploading mass data
Nakisa uses pre-built excel templates to allow users to load multiple leases into the application. To access the templates, go to the context menu and expand Import/Export Information:
Next, select Upload Master Agreement. Notice in the image below that you also have the option to upload multiple contracts, activation groups, and leasing units. In lease administration management life cycle, you have the master agreement that is the umbrella holding all the relevant leasing contracts. Once the MLA is approved and the contract defined, you can then define the leasing units within the contracts that may share the same terms and conditions. The leasing units may have different delivery dates or dates of payment, so we can divide the units up into activation groups based on their activation dates. The different templates are specific for each stage of the leasing process. For our purposes, we will use loading of Master Lease Agree as the example.
In the pop up, click on Download Template:
Upon seeing the excel template, it can be overwhelming at first glance with the multiple fields and tabs; however, Nakisa does provide some organization. The template comes with sample data to help with understanding what values are expected for each field. Required tabs and columns are filled in red so users can ignore the grayed columns if it does not pertain to the contract. The tabs and columns in the template are organized in a similar fashion as how they appear in the application. For example, we can see that the Partners tab under the Master Lease Agreement level asks for the following fields:
In the template under MLA Partner worksheet, you can find the correlating fields, Partner ID, and Partner Role ID that the application also asks for when entering a partner.
For the User Notification section, the users must already be set up in SLAN to assign them a responsibility. If we click on Add User, the application will ask for Responsibility and User:
Similarly, in the template you simply need to identify the employee ID and his or her responsibility for the relevant MLA and the name and email will auto populate in the application.
Before finishing off, let’s take a moment to mention other things to watch out for when using the templates:
- Never delete any columns. This is particularly important to remember since they map to the columns on the application.
- Do not change the name of the excel file or the worksheets within it even if they are not in use. If you have duplicate MLA IDs, then the application will override the MLA with the new information from the template.
- When utilizing the templates, some data may populate, and others may not. It is important to make sure the users, partners, company code and other variables are defined in SLAN.
This is a basic overview of the SLAN template using the MLA template as an example. For more Nakisa SLAN information, make sure to subscribe to our updates so you can get the latest info as soon as it comes out.