ValuD: How should you handle GAAP and IFRS in TRIRIGA leases?


As a matter of fact, both FASB and IASB initially started out in early 2010 with the idea of coming up with a single lease accounting rule. But in early 2014, they agreed to disagree in certain areas and as a result, dropped the idea of a uniform standard… Some of the major differences between the FASB GAAP and IASB IFRS 16 model include the following:

  • Accounting model: While FASB has proposed to continue with the dual accounting model, where the lease classification test is based on current U.S. GAAP classification criteria, IASB now requires all leases reported on the balance sheet to be treated as finance leases.
  • Measurement of lease assets: Under the FASB model, these former off-balance sheet leases will end up with a slower rate of depreciation than under the IASB model, which requires the leases to be depreciated on a straight-line basis…
  • Presentation of lease liabilities: The organization is expected to present lease liabilities relating to former on- and off-balance sheet leases as separate line items under the FASB model, while there is no such compulsion under IFRS 16…

How can IBM TRIRIGA help?

IBM TRIRIGA Real Estate Manager 10.5.1 will enable you to accelerate compliance with both the FASB and IASB leasing standards. Some of the newly added features for complying with these leasing standards are listed here:

  • 1. Lease classification can be set as “Finance” and “Operating” (instead of “Type A” and “Type B” that appeared in the earlier versions) based on the lease treatment calculation…
  • 2. IBM TRIRIGA supports the re-measurement logic under IFRS by letting the user choose the asset measurement methodology from three options (“At amortized cost”, “FV under IAS 16”, and “FV under IAS 40”)…
  • 3. IBM TRIRIGA 10.5.1 allows organizations to adopt the new standards either individually on a lease-to-lease basis or for multiple leases all-at-once using the Bulk Review Assumptions process…
  • 4. Initial Direct Costs, Prepayments, and Past Lease Incentives are no longer included in the Liability Value of the “Operating” and “Finance” schedules keeping up with the changes in the leasing standards.
  • 5. “Finance” or “Operating” schedule calculations for Retail Calendars have been enhanced to comply with both the standards for Net Rent and Rent Expense calculations.
  • 6. Making lease modifications by using the “Data Revise” and “Amendment” options, the user can make additional entries, make changes or correct errors in existing leases…
  • 7. If a new lease needs to be created during the course of modification of an existing lease, the “Copy and Link” feature can be used to copy the appropriate data from the current lease and link the two leases…
  • 8. IBM TRIRIGA allows the user to reassess the lease after the adoption of the new standards, which is helpful if there are changes in borrowing rates or fair market value…
  • 9. If an organization has a multinational lease portfolio, IBM TRIRIGA can help report local accounting standards…
  • 10. IBM TRIRIGA can also generate various kinds of impact reports which can help users to understand the impact of the new standards…

[Admin: This post is related to the 06.17.16 post about the five steps to FASB and IASB lease accounting readiness.]

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