It has been five months since the new leasing standard, IFRS 16 came into effect. Are you ready?
The new standard that requires business entities to report on all substantial lease arrangements on their balance sheet was jointly developed by IASB and FASB to address the pervasive lack of transparency in global financial reporting.
The standard is touted by investors, analysts, financiers and industry regulators as a panacea to the risks of financial statement fraud and creative accounting that have previously led to the collapse of some regulated financial institutions in Uganda.
In Uganda, most businesses will apply this standard for the very first time in the preparation of financial reports for the year ending 30th June 2019 and as the reporting date draws closer, a number of influential business leaders in supervised financial institutions have expressed concern over the complexity and unintended consequences of implementing the new standard.
The need to identify and gather all lease contracts, extract and collate lease data and transform operating leases into financial ones are some of the key hurdles during the transition.
Business leaders will also have to develop a solid strategy for managing stakeholder expectations and the potential reputational risk arising out of adverse changes in key business performance metrics.
To overcome these challenges, summit consulting recommends that business entities adopt a project management approach in implementing the transition. A multidisciplinary project team comprising of Accounting, Finance and information technology professionals should be assembled to execute the transition as a project.
Nakamya Winfred Patience,
IFRS 16 Champion at Summit Consulting Ltd