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There’s a big change on its way in the world of leasing. It may not affect you directly but it will certainly impact on your business and the way it accounts for your fleet in its financial reports and balance sheets. That change is coming in the form of IFRS 16. If you haven’t heard of it yet, then don’t worry. You’re going to hear a lot about it in the near future.
Put simply, IFRS 16 is a new accounting standard that will require all companies that lease items or services for their business – whether that’s vehicles, offices, property, IT systems, machinery, even coffee machines – to report those leases on their balance sheet. At the moment, a lot of companies keep these leased assets off the balance sheet, which gives an unrealistic view of a company’s value and performance. But the new IFRS 16 standard will give financial statements a new transparency and a more accurate picture of a company’s assets and liabilities.
The new IFRS 16 standard takes effect from January 1, 2019, but while that may sound like ages away, you should already be thinking about gathering the right information for your accounts department. Getting a head start on the new accounting rules will save you time and stress as the deadline gets closer.So what you should be doing now is creating a database of your entire fleet, detailing each individual vehicle’s make, model and terms of the contract so that when the IFRS 16 standard begins, you will be able to supply your finance department with all the figures they need. As well as the terms of the contract, you will also need to have details of:
- The cost of your fleet
- The value of your fleet
- The amount of interest you spend on your fleet
- The depreciation charges during the accounting period
Now, you may know how much you pay for each car and how long is left on their contracts, but do you know the current value of your fleet, the amount of interest you pay and the depreciation charges?
Fear not, help is at hand.