Tax reform & regulation

The International Accounting Standards Board (IASB) has published IFRS 16 – the new lease standard comes into effect on January 1, 2019.

Nearly every organization uses leasing agreements as a means to obtain access to resources,  causing them to be affected by the new standard set by the IASB.  Changes brought by the IASB to the lease accounting standard have a far-reaching impact on organizations’ business processes, systems and controls. The first step every organization will need to take is understanding the impact of the changes, however this is a very time consuming and expensive process. Organizations will require significantly more data around their leases than before given the new standards of balance sheet accounting for almost all leases. Companies will need to take a cross-departmental approach to the implementation and compliance of IFRS 16, as this is more than just an accounting problem.

Here is a quick example of way Heretik could be used to address
IFRS 16 in the transport and logistics sector.

Organizations in this sector often use leases in their revenue-generating activities. When does the organization have economic incentive to renew a lease (e.g. airline, shipping, trucks)? This may require substantial judgement and knowing these dates and terms is critical.

Using the Heretik Viewer, your team can save over 45 per minutes (conservatively) lease by having a more effective process for identifying and extracting the renewal dates and terms for each lease.

Determining when an agreement is a lease can be complex and judgmental. For example – does a shipping entity have control over an identified asset when considering a time charter or bareboat charter? Under current guidance, there is not a lot of emphasis on the distinction between a service or an operating lease, as this often did not change the accounting.

Using our powerful analysis features and Contract Segmenter, teams have each lease automatically identified by the type of agreement, title of the lease, and each key section. This provides structured data, allowing teams to quickly determine if an arrangement is actually a lease or not, saving hours or days of work.

Organizations in this sector often lease assets combined with other services (e.g. maintenance, insurance, etc.). Sometimes lessors have bundled products, and lessees will need unbundled lease information to account for leases separate from service elements. The real estate and equipment lessor.

Separating lease and non-lease elements can be next to impossible. With Heretik and Relativity, teams have simple, scalable work flows that allow them to leverage the work already done by our Contract Segmenter and preconfigured workflows, unbundling the leases while maintaining their unitization.