IFRS-16 or ASC-842

Preparing for the Transition

  1. Identify a key person to lead the project
  2. Understanding the new standard:
    1. Identify all parameters that will be required to perform the appropriate calculations
    2. What rents or costs are to be considered for each type of leases: gross rent, net rent, operating expenses, realty taxes
  3. What type of leases you have (real estate, cars, truck, etc) and cases where the lease will need to be restated
  4. Exemption rule
  5. Discount rate to be applied
  6. Determine which contracts are leases under the new standard. Identify all leases within the company, not only real estate leases or car leases, all contracts considered a lease that can be subject to the new standard.
  7. If no centralized list or database exist, you will need to contact all departments to identify and gather all the information:
    1. This can be a crazy job for low ticket or non material leases and you will need to create a policy to determine what leases to consider
    2. You can refer to the lease commitments disclosure in the financial statement
    3. You can refer to amortization schedule of assets
    4. You can refer to the rent expense
  8. Create a template of required information per lease
  9. Create a database: Once you have identified all your leases you need to implement a database to keep all the information to date and centralized
  10. Put a system and process in place for each department in the processing of each lease:
    1. Identify a key person per department to keep the data up to date
    2. Make sure any change to a lease is communicated to the key person for IFRS-16 or ASC-842
  11. Once the list is complete you will need to classify each lease in operating or finance lease for the ASC-842 standard.
  12. Determine what transition option to adopt (full retrospective or modified retrospective)
  13. Identify a software to perform all required calculation