In the absence of specific requirements in IFRS, the depositor questions the accounting treatment and the staff has analyzed the appropriate treatment by examining (a) whether, from the customer`s perspective, software access rights fall within the scope of IAS 38 or IFRS 16 leases; (b) whether or not the SaaS agreements create an intangible asset for the customer; and (c) if the customer has an intangible asset, how should the customer measure that intangible asset and all liabilities related to its acquisition? The transition to new accounting standards, including IFRS 16, will always be complicated. Companies would do well to invest in reliable leasing software, rather than letting accounting employees answer countless questions and answers about IFRS 16 practice to help them change. With Visual Lease, we ensure an easy transition to new standards with our reliable software. January 1, 2019 was the compliance deadline for all companies reporting under the new standard. However, studies show that many companies are still lagging behind in their transition. This is probably because some companies still practice iLlustrative examples according to IFRS 16 with Excel tables, while others use accounting software that does not keep their promises. If compliance with the new standard remains an issue, it`s time to find a reliable software solution. Here you will find a basic guide to IFRS 16 and how a reliable software solution can help your business. Failed, delayed or over-leased leases can occur if companies follow manual practice. Fortunately, they can be avoided with a stable IFRS 16 software solution. Automated notifications, sent via email whenever an important date is coming, prevent missed or delayed lease payments.
If a company registers a software leasing obligation of $US 1,000, which is to be amortized over a period of 5 years, with an interest charge of 50 $US per year, this would translate into an EBITDA of $10,000 and a net profit of $9,750 $US. In this example, an asset and liability of $1,000 are recorded on the balance sheet to reflect our client`s lease obligation. In the profit and loss account, EBITDA is not influenced by the lease, since interest and depreciation and amortization expenses are recorded below the EBITDA line. A member of the committee asked how US GAAP deals with this issue. In response, another committee member indicated that this depended on the customer`s ability to put the software on its own server, which is symmetrically to the vendor transferring control of a product. If this is not the case, this agreement is considered a service contract. At the second-day meeting, employees said that, having no control over the software in most SaaS agreements, the customer updated the project by removing the term “take possession of the software” and adding “right of access to software control.” Some members of the commission insisted that an analysis be added to determine whether the customer has the option of preventing others from using the software….