Artificial Intelligence Comes Together With Accounting Expertise to Simplify IFRS 16 Transition
The new lease accounting standards IFRS 16/ASC 842 will come into effect in January 2021 for private companies, requiring everything from a real estate lease to a car lease to a fax machine lease to be holistically evaluated, categorized, and placed on the balance sheet appropriately. Many organizations are turning to technology solutions to help with the heavy lifting, as the processing of these leases is long and cumbersome.
Enlisting a technology partner to extract data quickly and accurately into a single repository accelerates the transition and facilitates efficient lease management in the long run. Let’s look at a practical example to see how deploying artificial intelligence (AI) technology can simplify the IFRS 16/ASC 842 transition.
With just seven months to go before the IFRS 16 reporting 2019 deadline, a prominent UK retailer had a tight timeline to implement a lease accounting solution. Leverton, an MRI Software company was engaged alongside a leading accounting firm to support the 500+ lease IFRS 16 transition. The whole process had been completed ahead of schedule in preparation for the new leasing standards.
Below we outline the process from start to finish and highlight the significant benefits of AI coupled with accounting expertise for lease accounting projects.
Phase 1: Determining population and importing of data
- The accounting partner provided guidance around the relevant lease population for the transition project.
- The Leverton platform identified problematic or missing contracts.
- All documents were classified automatically, and Optical Character Recognition (OCR) technology created fully-searchable documents regardless of document quality.
Phase 2: Capturing the right data
- Leverton extracted the appropriate IFRS 16 data set co-developed between Leverton, technical accounting experts, and the client to ensure that both IFRS 16-relevant data points and those that would be useful from an ongoing lease management perspective were captured swiftly and accurately.
Phase 3: Data extraction and validation
- Through a weekly batch delivery process, Leverton used its market-leading AI coupled with two layers of quality assurance.
- Sample quality reviews were performed by the accounting team, focusing on high risk and high value assets.
- The result was an accurate, auditable data set.
Phase 4: Ongoing management and auditor communication
- Leverton provided a versatile solution, expertly positioned to deal with ongoing lease agreement updates, changes to IFRS 16 data points, and broader real estate management needs.
- Leverton streamlined and simplified reporting and audit requirements through transparent, auditable data.
Leverton’s AI lease abstraction solution allows the automated processing of assets and real estate leases. Whether it’s a fax machine, laptop, telecom tower, real estate, or auto lease, we have pre-built custom IFRS 16/ASC 842 extraction templates that will port the information into your database. We have worked with numerous accounting systems such as ProLease, MRI Horizon, SAP, Powerplan, Lease Accelerator, Visual Lease, Tririga, and many others to assist in this extraction process. Moreover, our system will provide highly structured data and meet the ongoing compliance standards of the new regulations.