IFRS 16 Rapid Deployment Guide

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Lease Administraon by Nakisa Make Your Deadlines Without Compromising Quality

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About the Authors

On January 1, 2019 the new lease accounting standard IFRS 16 will come into effect. The new standard

requires all companies to disclose their operating leases on their balance sheet. Companies not yet

prepared for the new standards are likely feeling the pressure of looming deadlines. With limited time to

select and configure a solution, many organizations are opting for a phased implementation. Under this

approach, organizations are able to upload contract data and prepare required quantitative note

disclosures, while retaining the option of integrating with their ERP systems when time permits.

Your Shortcuts Might Become Expensive Detours

The implementation of a solution that assists in compliance with IFRS 16 is a strategic decision. Applying

the standard will create a substantial amount of administrative work. It requires technical installations,

functional trainings, and ongoing administrative resources to load existing contracts, capture new ones,

reconcile lease invoices, and handle critical events that happen during the lifetime a lease.

When considering software solutions that can support your IFRS 16 initiatives, you’ll find there are many

different types of solutions. First, there are a number of basic tools, mainly originating from the EPM and

BI market, that do not directly integrate with ERP systems. These tools only support and automate some

parts of the lease accounting process. Typically, they are able to administrate lease contracts and

perform necessary calculations (NPV, IRR etc.). However, they are usually unable to sync directly with

external financial applications. An ideal solution should neither be an isolated lease administration tool

nor a pure booking extension to a finance tool. Instead, it should work like a distinct “subledger” for

leasing contracts, which combines special lease administration functionality with direct ERP integration.

The main reason for adopting a solution of this nature is its ability to connect with several different ERP

systems. This flexibility eliminates the need to adopt a different solution for each of the ERP systems

existing at your organization.

Dr. Andreas Krueger

Andreas is a Senior Solution Expert for Lease Administration by Nakisa in EMEA.

Andreas has been working on IFRS 16 projects for major international customers

since 2016.

Felipe Nogueira

Felipe is a Senior Functional Consultant for Lease Administration by Nakisa. He has

led a number of IFRS 16 implementation projects for various major companies all

across Europe.

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Adopting an application that directly integrates with your ERP systems will

help to significantly decrease Total Cost of Ownership (TCO) in the long

run. With direct integration, postings can be reflected in your P&L and

Balance Sheet automatically, invoice reconciliation can be facilitated more

easily, and finance and controlling systems can remain updated without

manual intervention. Contract modifications, terminations, index

dependencies etc. can be directly reflected in your ERP.

On the downside, an integrated solution has higher initial effort for

configuration and implementation. If you are late starting your IFRS 16

adoption efforts, you might feel as though this is a deal-breaker. A

temporary solution, like a self-made database, spreadsheet-based lease

collection, or standalone-tool, might look like the only feasible solution.

However, selection of a non-integrated solution could turn out to be a

very costly decision in the long run. As seen time and time again,

temporary solutions often turn into permanent solutions, as migration to a

new application requires significant technical and functional efforts. You

don’t want to find yourself in a lock-in situation, where a change of tool or

provider is hardly feasible.

This late in the game, the best approach is to choose a solution that can be

implemented using a phased approach. Standalone technology can help

you meet your deadlines by streamlining and simplifying parts of your

implementation. It’s crucial that direct integration remains on your

deployment plan so you can benefit from the cost savings and efficiencies

associated with direct integration. Lease Administration by Nakisa can be

deployed in standalone mode to help you get up and running faster. Rapid

deployment is based on four central pillars:

Pillar 1: Starter Kit

Lease Administration by Nakisa can be deployed in standalone mode. A

starter kit is available to kick-start your rapid deployment project and

allow you start lease accounting sooner. The starter kit contains:

• A ready-to-use application with functionality to manage leases

(based on our experience with many different organizations).

• A pre-defined system configuration for a sample company in

standalone mode. Master data associated with this configuration

can be adjusted for your needs to streamline the remaining data

configuration for your organization.

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Pillar 2: Lean Deployment Options

Lease Administration by Nakisa can be deployed as an on-premise solution. To save time during the

initial application setup, Nakisa also offers a ready-to-use solution in a Docker container. This helps to

speed up on-premise installation. If the setup of the necessary infrastructure is your bottleneck, you can

opt for a cloud-based deployment to streamline the process further.

Pillar 3: Rapid Deployment Methodology

The Lease Administration by Nakisa starter kit is the first step in configuring and centralizing lease data

within the application. With initial focus on meeting your IFRS 16 deadline, we can simplify deployment

by abstracting data from specific organizational units using a common high-level logic. In this scenario,

process configurations stay centralized, whereas master data (e.g. lessors, cost centers) can be

individualized. This allows us to populate the central template with data from organizational units while

connecting records to local master data.

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At this stage of rapid deployment, the central template is used and no integration to an ERP system is

required. Instead, disclosure reports are run directly in Lease Administration by Nakisa. Standalone mode

helps to streamline the initial implementation by minimizing efforts and risks that result from direct

integration with your ERP systems.

Once the data from the central template has been uploaded into Lease Administration by Nakisa and

used to produce disclosure reports under IFRS 16, direct integration can begin. A step-by-step approach

is used to connect Lease Administration by Nakisa to your ERP system. The following steps will be taken

to help you realize the long-term benefits of direct integration:

For the end user, the transition to connected mode should be a smooth process and the user experience

should not be affected. Lease contract data and key parameters will remain unchanged (depending on

localization requirements). The transition to connected mode can be performed step-by-step, company-

by-company, system-by-system.

Pillar 4: Rapid Deployment Methodology

During rapid deployment, it is highly likely that data gathering will become the bottleneck of your

implementation. We recommend gathering lease data well before the selection of a lease accounting

tool. However, we realize that this is unlikely given the current reality, so we have factored data

gathering into our rapid deployment methodology. Two main factors help to streamline data gathering:

Agile data transition and functional-technical training.

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All collected data should meet the technical interface requirements. However, this is easier said than

done. Lease terms and conditions are not always easily broken down in accordance with IFRS 16 logic.

For organizations with tens of thousands of leases, collecting, calculating, and verifying lease data can be

a daunting task. Data gathering and uploading needs to be well defined and structured. To achieve this,

we compile a set of reference contracts from your lease portfolio and compare them against reference

contracts we have collected during other IFRS 16 projects. These reference contracts will cover the

majority of potential lease complexities and help us verify the critical data points required for financial

calculations under IFRS 16. Once the reference contracts are defined, your data collection team is

trained on how to translate critical contract clauses that are hidden in existing lease agreements into

IFRS 16 terms that can be added to upload templates and used for technical data transition. Based on

past experience, this task is extremely time-intensive and should be planned to start as early as possible.

The transition itself is performed in an agile way, i.e. a dedicated system is used to perform a step-by-

step upload and verification of collected data. Once data for your organizational unit have been

collected, verified, and uploaded, changes to the data can be made directly within Lease Administration

by Nakisa.

Switching from Standalone to Connected Mode

Central objects in Lease Administration by Nakisa can either be loaded from an ERP or maintained

directly within the application. Postings can either be automatically synced with a connected ERP or

stored locally in transaction data tables. The overall input and calculation logic in Lease Administration by

Nakisa does not change between connected and standalone mode. Specifically, data that has been

inputted will not be lost. This allows us to keep the impact of the switch to a minimum. Users shouldn’t

notice a difference between connected and standalone mode.

About Us

A global leader in enterprise business solutions for Organization Transformation and Accounting & Compliance, Nakisa delivers

innovative, forward-thinking and robust human resource and financial management solutions that advance your business

strategies. Available on premise and in the cloud.

Working with a global network of partners and as one of the few Solution Extension (SolEx) partners of SAP® since 2007, Nakisa

serves 800+ enterprise customers and over 4 million subscribers in 24 industries. Nakisa is proud to work with some of the

world’s most renowned brands.

Email: info@nakisa.com

Tel: +1.514.228.2000

www.nakisa.com