IFRS 16 solution

IFRS 16 solution

This post describes the IFRS 16 solution for leases developed as a component of the SAP BPC with the Opal Wave BPC Cloud Go Live in a Day rapid deployment template. It is however available to any user of SAP BPC who has an existing Consolidation model, without the need to redevelop that model, offering a highly cost-effective way of addressing the new requirements of IFRS 16, ASC 842 and even supporting dual reporting where both US GAAP and IFRS reporting is required in tandem.

The Opal Wave IFRS 16 solution

 

  • The IFRS16 solution is an additional model for SAP BPC designed as a plug in to any existing SAP BPC Consolidation model and is delivered out of the box in the Opal Wave BPC Cloud.
    • As it is a separate model, the solution can be implemented for existing customers with minimal modifications to a customer’s existing system. Dimension member properties are used to facilitate any mapping between the members the IFRS16 model and the customer’s consolidation model.
  • The solution supports/includes:
    • The importing of existing leases (by use of transformation/conversion files and data import),
    • Adding new leases,
    • Adjusting existing leases if the lease should need to be extended, terminated early, or otherwise modified,
    • Leases which are conducted in a currency other than the business unit’s local currency,
    • Leases whose payments are made on a monthly, quarterly, or annual basis,
    • Calculating the lease liability & asset depreciation, and posting these values to a Consolidation model, and
    • A lease asset register which can either store lease documents themselves or hold links to lease documents held in, for instance, a CMS, plus any supporting text commentary.

To setup, a new lease, a lease reference member (and its associated properties) is created using the Lease Setup template (see below). Each lease has an associated lease-currency, asset-type (e.g. Land & Buildings), and is allocated to a business unit/Entity. In this example, a United States business unit has taken out a lease on a German warehouse in Euros.

The lease payment frequency can be set to yearly, quarterly, or monthly. Optionally, a lease can have a text-comment and a link to a document (stored on a network drive, or in BPC’s own Document Store) assigned.

Once the lease starting period has been chosen, the lease period number, payment, and discount rate percentage values can be entered using the Lease Input Schedule (see below). The input schedule will only display:

  • A single period in each year for leases with yearly payment frequencies,
  • A single period in each quarter for leases with quarterly payment frequencies, and
  • All monthly periods for leases with monthly payment frequencies.

The asset depreciation rate, and other lease costs can also be entered:

With this data entered, the lease liability calculations can be executed. This will generate monthly right-of-use asset (RUA) values for the asset cost, depreciation, and lease liability.

The lease liability values can be translated into reporting currencies (for example, Pounds Sterling), and this can be reviewed using the Lease Report:

To aid reconciliation between the IFRS 16 leases and the Consolidated reports, the lease liability data has also been aggregated into accounts which match those in the Consolidation model.

Once satisfied, the data can be approved for Consolidation. A small subset of the balance sheet is shown below.

The details of all leases can be reviewed in the lease catalogue. Double-clicking on the lease-reference link will display that lease’s calculated liability values. If the lease has a document link assigned, then this document can be opened by double-clicking on the “Open” link.

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july, 2018

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Fahd Mahamood
Fahd.mahamood@opalwave.com


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