Adopting NZ IFRS® 16 (Leases)

NZ IFRS 16® became effective from year ends 31 December 2019, and fundamentally transformed the way lessees account for their leases. NZ IFRS 16 can be a complicated standard to apply upon adoption, and then as “business as usual”. 

BDO's Financial Reporting Advisory team can provide assistance to navigate through the NZ IFRS 16 complexites. We are committed to ensuring that the entities we assist in their adoption of NZ IFRS 16 do so efficiently, thoroughly, and in the most cost effective manner possible.

What needs to be done to adopt NZ IFRS 16?

The effort and expertise required will vary entity-to-entity, depending on:

  • The size and age of an entity’s lease population
  • The nature of the items leased
  • The nature of an entity’s Group Structure
  • Which general accounting options an entity plans to elect
  • Which adoption options an entity plans to use.

Refer to our specific BDO Cheat Sheet for more details.
 

As a result, a successful (and more importantly, compliant) adoption of NZ IFRS 16 is less likely when an entity:

  1. Key lease-related information is unknown, and
  2. An entity is unaware of the relevant application areas and “fishhooks” within NZ IFRS 16.

How BDO’s Financial Reporting Advisory team can help

Adopting NZ IFRS 16 is a different experience for each entity. The challenges that NZ IFRS 16 introduced are a function on the number and nature of the leases that an entity has, and these will vary case-to-case, entity-to-entity. Get in touch today to learn more about our Financial Reporting advisory services.

Contact our Financial Reporting Advisory team

Approaches to tackle the adoption

General advice and support

  • Understanding and interpreting NZ IFRS 16.
  • Understanding the adoption methods allowed.
  • Understanding general scope-out options allowed.
  • How to group lease into similar portfolios, so that single discount rates can be applied.
  • Application to group structures, and inter-company leases.

Reviewing lease agreements, and extracting key lease information required.

End-to-end project management

BDO IFRS Advisory formally project manages the adoption of NZ IFRS 16 on behalf of management, including:

  • Project plan development
  • Assigning roles and responsibilities
  • Establishes Project Steering Committee (if required)
  • Oversees roles and responsibilities assigned to BDO

Ensures appropriate outputs and documentation is produced for management and external auditors.

Approaches to process the required accounting

End-to-end project management

BDO IFRS Advisory formally project manages the adoption of NZ IFRS 16 on behalf of management, including:                 

  • Project plan development
  • Assigning roles and responsibilities
  • Establishes Project Steering Committee (if required)
  • Oversees roles and responsibilities assigned to BDO

Ensures appropriate outputs and documentation is produced for management and external auditors.

Lease software solutions

For entities with large, and/or more complex lease populations that require a more efficient and automated approach, BDO steps in with its BDO LEAD lease accounting product.

BDO LEAD can be utilised by entities, either:

  • As a licence, or
  • As part of BDO’s Managed Leased Services outsourcing offering (where we do the “grunt work” of running the software on your behalf). 

Read more about BDO LEAD here.

Discount rate determination

In some cases, entities may need to engage valuation experts to model, determine, and provide (auditable) support to the discount rates used by the entity in applying NZ IFRS 16 accounting. Were this is required, BDO’s Corporate Finance experts step in to provide these services to our clients.         


Young-businessman-using-digital-tablet-while-working

BDO Lead - our lease accounting software solution

BDO Lead is our dedicated lease accounting software solution, which replaces manual spreadsheet accounting. This may be necessary or preferred in instances where: there is a large lease population; the entity is subject to external audit; there are group entities who also report under US GAAP; or when there is limited people-power and resources to adopt a manual, spreadsheet-based approach.
Discover BDO Lead

NZ IFRS 16 publications and training content

BDO has a wide array of publications and other training material free available. Below is a one-stop-shop of this material for entities to access:

  • BDO NZ IFRS 16 Summary on a Page - high level overview of NZ IFRS 16 requirements conveniently reduced onto 3 pages.
  • IFRS in Practice - BDO's detailed 140 page publication building on the technical aspects of the above Need to Know publication, as well as also including various illustrative examples and commentary on issues currently being encountered in practice.
  • IFRS Advisory “Cheat Sheets” - short publications related to specific aspects of applying NZ IFRS
  • Online training 'BDO Rise' - Disaggregated training modules focusing on various specific aspects of NZ IFRS 16 application
  • Financial Reporting Webinar Series - run by BDO Australia, this is an easy way to stay up to date with financial reporting and accounting standards 
  • Video with BDO’s Global head of IFRS - a high-level overview of (NZ) IFRS 16 with BDO’s Global head of IFRS, Andrew Buchanan


Contact our team

James Lindsay

James Lindsay

Partner, Head of Financial Reporting Advisory
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