• Adopting NZ IFRS 16 (Leases)

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Adopting NZ IFRS 16

NZ IFRS 16 becomes effective for year ends 31 December 2019 and beyond, and fundamentally transforms the way lessees will account for their leases.

NZ IFRS 16 can be a complicated standard to apply upon adoption, and then as “business as usual”.

As entities begin to adopt NZ IFRS 16, many are coming to the conclusion that assistance from external experts to navigate through the complexity is a necessity.

This is where BDO IFRS Advisory Services can step in for your entity.

Who are BDO IFRS Advisory?

BDO IFRS Advisory are BDO’s dedicated service line that lives and breathes all things accounting-standards-related.

Our team has the benefit of having sat on both sides of the NZ IFRS 16 adoption divide…from being the party knee-deep in the adoption, to the party reviewing and assessing the adoption. 

Our approach with entities we assist is:

“We can be as engaged as you need us to be… let’s first make use of the resources your entity has, and then we can fill in the gaps.”

To find out more about how BDO’s IFRS Advisory team can help you, click the drop down box below for more information.


What needs to be done to adopt NZ IFRS 16?


While accounting standards are not an entity’s enemy, Sun Tzu’s famous quote from the Art of War at the top of this page is very apt when thinking about how to approach the adoption NZ IFRS 16.

This is because 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.

To refer to another apt quote from The Art of War: 

“Victorious warriors win first and then go to war, while defeated warriors go to war first and then seek to win”

The take away message here is simple: “Plan, plan… and then plan some more”.


Planning for adopting NZ IFRS 16


Hindsight is a great thing for those that are following in the footsteps of those that have gone before them, which is great, as a number of entities have already adopted NZ IFRS 16 and their experiences are out there for the rest to learn from.

If you talk to those entities, they will almost certainly tell you that adopting NZ IFRS 16 is not as straight-forward as “running some numbers in a spread sheet”, even for what appears to be a relatively “simple” lease population at the outset.

This is because more often than not there are various judgements to be made, estimates to be determined, accounting options to be decided upon, and nuanced complexities to be worked through.

All of which will need to be worked through and resolved well before an entity is at the "spreadsheet stage" of their adoption journey.

For examples of these areas, refer to our specific BDO Cheat Sheet on this topic.


​How BDO’s IFRS Advisory team can help you


Adopting NZ IFRS 16 is going to be a different experience for each entity.

The challenges that NZ IFRS 16 introduces 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.

Typically, that nature of the assistance our clients adopting NZ IFRS 16 involves one (or more) of the following service offerings:


(i) 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.


(ii) 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). 

Visit the BDO LEAD webpage for more information.


(iii) Supplementary services


Discount rate determination

In some cases, entities may needi 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.                                                                      


BDO IFRS Advisory’s team have “been there, and done that”.

We know NZ IFRS 16… what the adoption process involves… where the pit-falls and trip-wires are… and ultimately, the nature and form of documentation and outputs that external auditors are expecting to be provided with by entities.

We are committed to ensuring that the entities we assist in their adoption of NZ IFRS 16 do so (i) efficiently, (ii) thoroughly, and (iii) in the most cost effective manner possible.





BDO’s very own lease accounting software solution – BDO LEAD


BDO is the only large global accounting firm to publically offer a dedicated lease accounting software solution, both as an all-in licence, or as a managed service.

Accounting software solutions act to replace manual spreadsheet accounting, which may be necessary or preferred in instances where:

  • There is a large lease population
  • There are a moderate number of leases requiring recalculation over their term, i.e. property leases
  • The entity is subject to external Audit
  • There are group entities who also report under US GAAP, and/or
  • There is limited people-power and resources to adopt a manual, spreadsheet-based approach.

Refer to the BDO LEAD page for more information.


Where to get the latest BDO publications and training content


BDO has a wide array of publications and other training material free available.

Below is an up to date one-stop-shop of this material for entities to access:

BDO Summary on a Page

BDO’s high-level overview of NZ IFRS 16 requirements conveniently reduced onto all of three pages.

BDO Comprehensive publications

BDO Need to Know

BDO’s detailed 64 page publication covering the technical aspects of appliying (NZ) IFRS 16.

BDO IFRS in Practice

BDO’s detailed 14 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.

BDO IFRS Advisory “Cheat Sheets”

BDO’s short, “punchy” publications related to specific aspects of applying NZ IFRS 16

Click on each topic heading below to download your own copy

Online training – BDO Rise

Disaggregated training modules focusing on various specific aspects of NZ IFRS 16 application, including:

  • High-level introduction
  • Reccognition exemptions
  • Identifying a lease
  • Determining the lease term (lessee)
  • Recognition and measurement (lessee)
  • Sale and leaseback transactions
  • Presentation
  • Lessor accounting
  • Transition

Financial Reporting Webinar Series

Topics related to the application of NZ IFRS 16 covered in BDO’s financial reporting webinar series:

You Tube Video – with BDO’s Global head of IFRS

Short 7 minute high-level overview of (NZ) IFRS 16 with BDO’s Global head of IFRS, Andrew Buchanan.


Want to get in touch for an initial chat