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Accounting Standards in Lease Accounting

  • 13 May 2024
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Currently only IFRS16 and US GAAP are provided as Accounting Standards for Lease Accounting in IFS Cloud.  

Does anyone know if there are plans to add other Accounting Standards such as FRS102 UK GAAP?

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Best answer by John Keith 13 May 2024, 17:40

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Hi Laura, 

The Lease Accounting Functionality in IFS, was introduced mid Application 10 Life Cycle in UPD 3 and slightly improved in UP4 for these specific standards that were jointly written between the two accounting standards boards in question, the US decided to treat operating leases slightly differently, and why IFS needed to have two sets of postings to cater for each. All of the combinations in the IFS Functionality require you to maintain a “Right of Use” Fixed Asset that you maintain alongside the lease liability for the life of the lease leading to the majority of the lease cost (Non Interest Related) to be recorded as a Post EBITDA cost , this is different to how FRS 102 allows you to account as a pre EBITDA cost


FRS 102 will change in the UK to adopt the principles of IFRS16 in January 2026, therefore I can’t see IFS changing how this functionality works to address a short term difference in accounting treatments, the world is moving towards being unified by IFRS as the majority of global stock exchanges require you to use it for listed companies. IFS has shown it’s commitment in the past to make sure it reacts to major IFRS requirements and I expect it to keep using IFRS as it’s benchmark in accounting standards in the future.


The FRS 102 model can be achieved using period allocation manual journals to split the lease costs and interest costs in the P&L (on a straight line basis) on a monthly basis for the length of the lease, not as nicely system based with month end processes as the Lease Accounting/Fixed Asset module but will give the right result 

Cheers

John

 

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