Financial Consolidation - IFRS 16

unknown

Hello everyone,

I created this topic regarding the implementation of the IFRS 16 standard, because at the moment several clients, at least Europeans, are integrating IFRS 16 in their financial consolidated reporting.

Bearing in mind that d/EPM in both version v11 and version 12, it still doesn't have any standard solution.

In guidelines, and if you can share it, what workaround are you implementing in your Financial Consolidation models to respond to IFRS 16?

Regards

Rui

filip-kosnac

Hi Rui,

I hope my answer gives you some idea and overview.

Companies that are subject to IFRS 16 accounting usually have lot of leasing contracts. Due to high number of these contracts and the related information required for valuation of these contracts, the contracts are typically stored and handled in the ERP systems, typically in some special module of ERP for (leasing) contracts. Based on some inputs, these module typically track also the valuation of each contract, and as such, you can get aggregated impact by entity from these modules.

On the Financial Consolidation side, how to handle this really depends on what trial balances are send to dEPM from the source:

 

1. Accounting ERP connected to contract module could already post the IFRS16 related transactions, so when data is sent to dEPM, all the IFRS16-valuation journals are already included in the imported trial balance.  In this case, unless there is some special use case from group perspective, there is nothing to do in dEPM. If there is some special case, then the typically the knowledge about that is concentrated in the group accounting department, and the recommendation is to post manual group journals. And if needed, attachments can be added to the journal to support the documentation of the journal.

 2. If imported trial balances do not include IFRS 16 adjustment, then typically customer needs to get the valuation result of all contracts per entity by group account from the ERP module (or if the ERP module is not able to provide it, contracts are exported to excel and valuations and the related journals are  calculated outside of ERP), which is the basis for the manual journals to be posted in dEPM Financial Consolidation. If more journals are required, you can prepare them in Excel and mass import those directly to FinCon.

 3. Optionally, you could have a dedicated import level for aggregated IFRS 16 adjustment by account on entity level, if that can be extracted from the source.

 

If it is desired to increase visibility of IFRS 16, all IFRS 16 journals in dEPM can be posted on dedicated level. This is optional.

If the journals are to be posted on entity or group level, it is up to customer decisions, I have seen both approaches.

 

As you see and based on the above statement, the IFRS 16 is from DEPM perspective more of an process topic about by what method the data is created in the dEPM FinCon (included in the trial balance, or other import level, or (imported) manual journals).