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 IFRS16 Leased Asset Management

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with a quick one-month multibook implementation.

Hold both local and IFRS standards and
automatically output consolidatedadjustment entries/consolidated notes

IFRS16 leased asset Management
 Outline and Key Points

Explanation by Business Brain Showa-Ota Inc.
 Taisuke Inoue

  • 1 Basic accounting
  • 2 Keeping 2 ledgers and optimizing entry
  • 3 Automatic output of entries
  • 4 Local currency-based entry/management of ledgers

Taisuke Inoue

BUSINESS BRAIN SHOWA・OTA INC.
Accounting/Consulting Headquarters CPA Division
Manager Certified Public Accountant

After graduating from college, Taisuke engaged in sales at a communications equipment manufacturer. Later, he engaged in auditing of various businesses, including manufacturing, retail, food manufacturing, and information technology at a major auditing firm. After leaving the auditing firm, Taisuke experienced accounting in manufacturing before assuming his current post. At Business Brain Ota-Showa, he has engaged in various projects, including general IT control implementation for an IPO preparing company, implementation of a new revenue recognition accounting standard, and handling an electronic account book preservation method.

What is IFRS16?

With IFRS16, the lessee must recognize right of use as an asset and record lease obligations for all lease transactions, excluding short-term leases and low-value asset leases (accounting in accordance with conventional operating leases *recording fixed lease costs across lease period, not recording right-of-use assets and lease obligations).
IFRS 16 flow

IFRS16 Requirements

The IASB (International Accounting Standards Board) announced a new standard of lease accounting, IFRS16 “Leases,” in January 2016. IFRS16 is effective for fiscal years starting in or after January 2019, and from the fiscal year ending in March 2020 for companies with fiscal years ending in March.
Instead of on-balance processing (capitalization) for all lease contracts, off-balance processing (expense) will be necessary depending on the lease amount and lease period.

When applicable for on-balance processing, contract, right-of-use assets, and lease obligations must be recorded; however, lease obligations require recording with the discounted present value of the total lease expense, and right-of-use assets require recording also with the amount including initial cost.

Regarding right-of-use assets, for depreciation and lease obligations, interest expenses and lease obligation repayment must be recorded every month. Compared to conventional operating lease management, this requires an immense amount of effort; thus, efficient operation utilizing a system is desired.

Journalization Example

Lease period: 5 years, payment amount: 200,000 yen (once per month), Discount rate: 5%

Conventional Lease Accounting

Monthly

Debit Credit
Rental Expense200,000
Bank Account200,000

New Lease Accounting Standard IFRS16

Contract

Debit Credit
Right-Of-Use Asset  10,598,140
Lease Obligation10,598,140

Monthly

Debit Credit
Lease Obligation155,841
Interest Expense44,159
Bank Account200,000

Depreciation

Debit Credit
Depreciation176,636
Right-Of-Use Asset176,636

multibook IFRS16 Leased Asset
 Management Features

Feature 1

Quick Setup Available

  • Begin operation in 2 weeks at earliest. Please request a estimation for implementation support services.
Implementation schedule

*Should you wish to learn more about the implementation process or have any questions, please contact us.

Feature 2

Supports Multiple Ledgers (Local and IFRS Standards)

  • Local overseas subsidiaries can manage information with loan processing and interest-inclusive method processing in local standards. For consolidated, information can be managed with sales processing (principle method) in IFRS standards.

Feature 3

Equipped with Automated Calculation and Judgement Functions

  • Hold minimum standard amounts and short-term lease maximum-months periods for each company, and automatically judge short-term, small-amount, and ordinary assets.
  • Automatically calculate initially recorded right-of-use asset amounts, monthly lease debt repayment amounts, and interest expenses.

Feature 4

Features Consolidation Adjustment Entries and Notes Disclosure
for IFRS Compliance in Consolidated Accounting

  • In addition to a single journal entry feature to multibook’s accounting feature, we also provide consolidated adjustment entry and consolidated notes output features for consolidated-only IFRS application.

Feature 5

Effortlessly Functional Across Global Locations

  • Supports 12 languages*

*Japanese, English, Thai, Vietnamese, Korean, Burmese, German, French, Spanish, Chinese (Traditional) (Simplified ), Indonesian


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