Based on their experience, LOYIC consultants who are experts in the SAP IFRS 16 solution and have worked on projects for relevant companies such as PUIG, MANGO and CIRSA, reveal the essential points for a safe and effective implementation that will cover all the requirements of international regulations
Since the law came into force (January 1, 2019), at LOYIC we have done more than a dozen IFRS 16 implementations in SAP RE-FX for large companies in sectors such as retail, pharmaceutical, telecommunications, real estate, etc.
The IFRS 16 international accounting standard on leases requires the recognition on the company balance sheet of an asset and a liability for the discounted value of the payments anticipated by the lease. Its entry into force on 1 January 2019 completely modified the accounting for lease contracts from the lessee’s point of view. At LOYIC we are experts in implementing the Flexible SAP Real Estate Management module, which covers all IFRS 16 requirements. Our consultants have extensive experience in multiple leasing models and industries.
This interview engages with four of our professionals (from left to right in the photo: Laura Triay Andreu, Consultant; Rocio Teruel Cecilia, Consultant; Gemma Sendra Santacana, Project Manager; and Cristian Jiménez Rodríguez, Programmer), all of them fully involved in projects for important companies such as PUIG, MANGO and CIRSA. Here, they reflect on the essential points, difficulties and benefits of an optimal IFRS 16 implementation in SAP Real Estate.
QUESTION. What are the critical points for a successful IFRS 16 implementation in SAP Flexible Real Estate Management?
JOINT ANSWER. Based on our experience in implementing SAP RE-FX and IFRS 16 for retail customers (PUIG, MANGO), as well as managing the maintenance for other companies such as CIRSA, we think the keys to success lie mainly in these 4 variables:
- KNOW THE RULES AND HOW TO INTEGRATE THE LEASE CONTRACT INTO THE RE-FX MODULE. Users should be aware of the implications of the standard, to know how to identify whether potential contractual changes are affected.
- GLOBAL VIEW OF IMPACTS. Involve all affected departments to carry out a rigorous analysis of current business processes, so that a solution that fits the customer can be applied, avoiding exceptions or processes outside the normal patterns for receiving, approving and paying supplier invoices. It is important to set permissions correctly and anticipate the impacts on other business areas or other systems.
- SIZING RESOURCES FOR DATA MIGRATION. Do an inventory of the contracts by contract category, analysing the quality of the data in legacy systems. Extract relevant data, transform it according to SAP RE-FX needs, and automate the uploads.
- STANDARDISE PROCESSES AND PRIORITISE IMPROVEMENTS BASED ON CRITICALITY. Within the possibilities offered by the RE-FX module, adapt the processes to the customer’s needs, avoiding unnecessary developments and excluding anything that does not contribute value.
QUESTION. What are the most common issues? What do you do at LOYIC to overcome them?
ROCÍO TERUEL. The main issue is the adaptation of client processes to SAP Real Estate Management and to IFRS 16 compliance.
And how do we overcome them? By correctly prioritising the analysis and subsequent construction of the processes affected by the new standard.
Our goal is to stay as close as possible to standard SAP solutions, based on best practices. When the possibilities offered by the standard are not sufficient, we devise flexible and user-oriented client developments.
LAURA TRIAY. I would add that data collection requires a very significant effort, as contract management is not always handled by a single department. The key in such cases is to integrate information.
Generally, you should go to the original contract to search for information for two reasons: 1) it is not systematized; the management is handled with Office tools, or 2) the management systems used do not have the detail required to implement the standard correctly in terms of holdings, income variations, etc.
It is essential to have the information you need to know what data needs to be collected and how to process it correctly, considering that the goal is to have data integrated into the system, including and addressing all the scenarios that may be present.
We always try to hold meetings with all the departments involved in the implementation, ensure key user involvement and do continuous follow-up.
QUESTION. What do businesses value most once the implementation has been successfully completed?
CRISTIAN JIMÉNEZ and GEMMA SENDRA. At LOYIC we bet on quality and that is reflected in the final results of our work.
In addition to providing the tools to cover regulatory compliance, we offer functionalities that make it possible to manage lease contracts with the needs of each customer in mind, whether with standard solutions or custom solutions based on flexible process automation for regulatory compliance.
What companies value most, therefore, is the way we deliver such a clean and automated solution to IFRS 16 compliance and, additionally, that we provide them with a tool to manage their lease contracts.
QUESTION. What is the average time for an IFRS 16 implementation in SAP Real Estate, more or less?
JOINT ANSWER. It depends on many factors: the number of lease contracts the customer has, the departments involved, etc., although the most important factor is the scope of the implementation. If the customer is focused solely on regulatory compliance, less time is needed than if improvements to the management of lease contracts are also implemented. Really, each project is unique and the time frame will depend on the customer's needs.