International Financial Reporting Standard (IFRS) 16 becomes effective for accounting periods starting from 1 January 2019. This will have a dramatic effect on accounting for leases, particularly the operating type.
The unique Opal Wave IFRS 16 solution for SAP BPC takes time, effort and worry out of organisations’ preparations for this landmark measure. This application is ideal for customers with any form of existing SAP BPC installation.
Opal Wave recently held a webinar for potential buyers of its IFRS 16 solution, who asked some key questions about it. As they are of wider interest, we’ve listed the six key questions about SAP BPC IFRS 16 here, along with our answers to them.
How long does Opal Wave’s IFRS 16 solution take to deploy?
The time scale varies, but it’s typically around 10 to 15 days. From planning to deployment into an existing BPC environment, including loading the initial data.
Where customers don’t already have the data available, they can gather this using templates we provide in advance. While some organisations already have a lease database or management system, so they possess the necessary source data, many don’t.
We’re therefore finding customers can be at many different stages in collecting their lease information. This tends to be the most significant variable in determining the overall timescale.
Is Opal Wave’s IFRS 16 solution connected to SAP Asset Accounting?
It certainly can be. We haven’t pre-defined which source systems the solution gathers data from, because of the sheer variety of these that our customers may possess. The data may come from SAP Real Estate Management and in other cases it will be logged in Excel, for example, but we’ve found many customers just hold the information on various pieces of paper across the business, in units that have signed contracts.
The key point is we’ve created a solution that avoids excessive development costs and is versatile enough to support everything from sophisticated source system integration to basic manual input, so it can be tailored to each customer’s situation.
Is the solution able to deal with SAP and non-SAP data combined?
Yes. The solution has no preference as to where data comes from, whether it’s a SAP environment or another type.
We designed it knowing some customers would have enterprise resource planning (ERP) systems feeding single consolidation solutions. While others might have lease management systems or even manual processes. It’s an open aggregation solution that can work with any number of sources.
Can customers extract data automatically from any system?
Yes…and we mean any system, not just SAP environments.
The level of sophistication and integration required depends entirely on each customer and their circumstances. It’s usual for organisations to have a single ERP or other system containing all the data but we can provide as much automation as required.
Do we need to enable any extractors to retrieve the data from SAP ERP?
This would depend on factors such as which versions of the systems were deployed and what features had already been enabled. However, the process for extracting the data we need is essentially the same for all target systems, whether these are SAP products or not.
Can the system create a journal for our ERP postings?
Yes. The solution calculates all required values for posting back to ERP systems and these may be retracted for display as journals.
Because most operating leases have historically been treated as expense invoices and don’t have sufficient associated information, it’s almost impossible for accounts payable teams to code them, to account correctly for IFRS 16.
Our IFRS 16 solution calculates lease liability amounts and Right of Use Asset valuations. It also calculates repayment interest and capita splits, plus asset depreciation amounts. This enables correct entries to be posted back to ledgers, split according to requirement – by entity, asset class and even individual leased asset. Even where there are multiple ledgers and account charts, users have the flexibility to generate appropriate journals automatically for each.