IN A NUTSHELL...
Despite the recent extensions, the deadline for public sector IFRS 16 compliance is fast approaching.
We know already that far from being a mere technical accounting concern, the new standard represents a huge data management challenge. Tempting as it may be to push it down your priorities list, this is the time to ensure your processes are up to the task, to update your capabilities, and ensure compliance on time with minimum disruption.
Public sector IFRS 16 implementation: what is the deadline?
Earlier this month, the Government’s FInancial Reporting Advisory Board revised the date for IFRS implementation to 1 April 2022. In response, the CIPFA LASAAC Local Authority Accounting Code Board has deferred the implementation of IFRS 16 Leases in the Code of Practice on Local Authority Accounting in the UK until the 2022/23 financial year.
The CIPFA LASAAC stresses that this is a temporary measure, designed to relieve the continued pressures on council finance teams in light of Covid. No further extensions are anticipated.
Achieving compliance: lessons from the field
While the implementation deadline extensions are welcome, forward-thinking public sector bodies are already putting solutions in place to get a handle on compliance.
Hackney Council is one such organisation. Speaking in the context of that project, MHR Analytics’ Nick Felton outlined the challenges local authorities and other public bodies are faced with:
“From premises through to big-ticket office equipment, IFRS 16 demands detailed consideration of lease data relating to a potentially huge range of assets - many of which were previously dealt with off-sheet. Under the new regime, active lease management is essential. Failures in data collection, calculation and disclosure can all mean sleepwalking towards non-compliance”.
Thanks to a partnership with MHR Analytics and CCH Tagetik, the local authority now has the ability to manage more than 500 leases quickly, all from a single location, with on-demand access to detailed lease information. It is exactly the type of solution organisations need to manage compliance, without adding to their resource and workload burden.
Have you underestimated what’s involved?
Especially when it comes to forward planning and what’s involved in IFRS 16 implementation, lessons can also be learned from the private sector.
For instance, according to PwC’s private sector post-implementation survey, 55% of organisations found that IFRS 16 brought unexpected challenges. Many underestimated what was involved and few used the entire implementation period to full effect. For most, it was a race to become compliant on time.
The lesson for public bodies from this seems clear: now is the time to act.
Updating your capabilities
The other big risk is the temptation to do the bare minimum to become compliant. For instance, let’s say you have already (or are about to) identified all the leases within your organisation to be brought on-balance. This is a key step in becoming compliant.
But staying compliant throws up a whole new set of challenges, many of which are linked to data management. PwC found that for 72% of organisations, their current lease management solution does not enable them to cope with the new accounting and reporting requirements.
Old solutions were not built for IFRS 16, and unless you can absorb a significant increase in the finance team’s workload, ‘getting by’ with Excel is no longer a viable option.
Your next steps
Designed specifically for the public sector, our recent webinar explains how to take the pain out of IFRS 16 compliance. You can access it here.
You can also download our IFRS 16 Essentials Guide to help get you started on the journey to compliance
Thanks to our partnership with world-leading reporting specialists, CCH Tagetik, MHR Analytics offers an IFRS reporting solution that can be tailored specifically for your organisation’s needs. For rapid, ongoing compliance without having to completely overhaul your existing technology stack, discover our solution here.
Media contact: During office hours (Monday to Friday, 9am to 5pm) all media enquiries should be directed to Whiteoaks via MHR@whiteoaks.co.uk, tel: +44 (0) 1252 727313 or 07769 958545, or Liz Close, PR Specialist, via firstname.lastname@example.org or 07879 110 594.