Last month on June 26, Planon hosted a webinar on the relevance of including property departments in the process of becoming ASC 842 and IFRS 16 compliant. Some startling research in this area sparked our interest in this topic and we really wanted to hear the perspective of our webinar attendees.
According to JLL research, 52% of property managers indicate that up to one third of their data is inaccurate in regard to the actual number of buildings, assets, square meters, and costs. Up to one third of data is wrong!
This has a huge impact on the timely and accurate implementation of the new lease accounting standards and could be a major factor why implementation projects can take so long to complete. As Anthony Maalste, Partner at Deloitte Risk Advisory, recently wrote in his blog post, organizations regularly think they can complete the implementation in a few weeks, but it will often take six to nine months if they want to do it right. Another startling number Anthony Maalste shared in his post was that most organizations have still not started their projects.
In our webinar, we also enquired about where attendees are in their process of becoming IFRS 16 and ASC 842 compliant. Of course, attendees of a webinar titled “The power of combining property management and IFRS 16 compliance” might be ahead of the average organization.
Almost one third of our attendees responded that they are already implementing the new standard. Of the remaining two thirds, responses were split between initial research, forming the internal project team, getting the required data organized, and finding a software partner.
Given the JLL research on inaccurate data, we were also interested in what challenges they face during these projects. Were the challenges focused on data collection and accuracy or did other things keep our attendees awake at night? Is it connecting all the right departments? Or would finding the tools be their biggest challenge? We have heard from several customers that interpreting the standard and finding the right accounting partner is also more difficult than expected.
Below you can see that collecting the data was indeed the most frequent response.
It makes sense that so many of our attendees see data as a challenge in becoming compliant with the lease accounting regulations. How can leases be capitalized if it is not clear which contracts you have where? Or which parties, contract durations, terms and conditions and index rates? Without complete and accurate data on all of your leases, it is simply impossible to comply with IFRS 16 or ASC 842 in a timely and cost-efficient manner.
PwC states in its research that the impact of the lease accounting standards on data, systems and processes is substantial. Reviewing and assessing the options for using existing systems or implementing new systems will require involvement from your IT department as well.
The webinar shows that various organizations are already working on the implementation of IFRS 16, but that a major challenge lies in the field of data collection. At the same time, we see that interpreting the new standard is also seen as complex. In order to ensure an efficient implementation, I first of all advise you to involve internal stakeholders, such as the real estate department and IT, in a timely manner. By working together with an experienced software and implementation partner, you increase the chances of successful implementation
