New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) are changing.
From 1 January 2019, (NZ) IFRS 16, will add additional complexity to the way that lessees of for-profit entities will have to account for their leases.
- Operating leases now come on-balance sheet like Finance leases do currently (certain practical expedients to this).
- Entities will therefore appear more “asset rich”, but also more “indebted.
- Financial metrics and ratios based off of reported results will change across the board (i.e. EBIT(DA), gearing debt-to-equity ratios, net current assets, times interest expense, Net profit, operating and financing cash flows).
This change will impact all for-profit entities, including:
- Those already applying NZ IFRS, and
- Also those entities that are currently “non-large” and therefore applying Special Purpose Financial Reporting (SPFR).
Because NZ IFRS 16 brings more assets on top the balance sheet, entities will need to assess whether they would still fall below the “large” entity asset thresholds ($60m assets – New Zealand companies; $20m assets – Overseas companies).
For certain entities, a manual, spreadsheet-based approach to manage and account for their leases will be onerous, impracticable, and risky (in terms of error and/or overwrite).
This is where BDO LEAD can help!
BDO LEAD is BDO’s flagship streamlined and efficient technology solution designed to assist entities mitigate the otherwise complexity and risk associated with a manual spreadsheet-based approach to NZ IFRS 16.