Accelerate your IFRS 16 project 27 June 2018

Transcription

1 IFRS 16 Webinar Accelerate your IFRS 16 project 27 June 2018

2 Introduction Ruben Rog Twan Bakker Sam Curwen Matthijs Lugten Partner Manager Assistant Manager Tax Senior manager 2

3 Agenda 1. Project planning 4. Processes & controls 2. Transition considerations and key judgements 5. Insight on tax 3. Data extraction and systems 6. Wrap up 3

4 Project planning

5 IFRS 16 business impacts Treasury Covenants Credit rating Discount rates Strategy Lease vs buy Lease structuring Sale and leasebacks Other impacts Management reporting Management remuneration Training IFRS 16 accounting change Systems & Processes System solution ERP integration Future process design Finance Transition options Data collection Tax KPIs Investor relations External communication Analyst queries 5

6 IFRS 16 transition project tips Educate Commit resources Setup work streams Schedule regular status updates Involve the right stakeholders 6

7 Project work streams Data and systems Processes and controls PMO Change management Accounting and reporting 7

8 Project planning activities PMO Project definition Team mobilisation Project management Accounting and reporting Data and systems Impact assessment and transition approach Data extraction plan Develop accounting policies and guidance Selection of IT tool Discount rate approach and model Data extraction Technical accounting training Tool implementation Engage with tax and planning teams Data load Processes and controls Change management Develop controls for initial data extraction Identify and map all stakeholders Design detailed lease accounting process Create awareness Lease completeness check Communications Validate process and controls with auditor Organise and deliver training Embed new process in organistion 8

9 Project planning illustrative plan PMO Data and systems Process and controls Accounting and reporting Change and engage Activities Project definition Team mobilisation Project management Data extraction plan Selection of IT tool Data extraction Tool implementation Data load Develop controls for initial data extraction Design detailed lease accounting process Lease completeness check Validate process and controls with auditor Embed new process in organistion Impact assessment and transition approach Develop accounting policies and guidance Discount rate approach and model Technical accounting training Engage with tax and planning teams Identify and map all stakeholders Create awareness Communications Organise and deliver training 9

10 Transition considerations and key judgements

11 Transition options Approach Effort/data requirement Impact on financial metrics Date of equity adjustment Restate Comparatives? Full retrospective Higher Best 1 January 2018 Modified retrospective Option 1 (asset recalculated) Higher Moderate 1 January 2019 Modified retrospective Option 2 (asset = liability) Lower Worst 1 January

12 Impact assessment modelling transition options P&L expense under each option B/S asset on transition B/S liability on transition 12

13 Key accounting judgements and policies Identify key lease accounting judgements and policies to be determined and documented Lease definition Leases of low value Short term leases Lease term Fixed or in-substance fixed payments Variable payments Discount rates Re-assessment Modifications Sub-leases Impairment Provisions Treasury Tax Real Estate IT 13

14 Key accounting judgements Lease definition Lease term Is it a lease or a service? Is there an embedded lease? What is reasonably certain? Rent-free period Main lease period Extension period customer is reasonably certain to exercise Termination period customer is reasonably certain not to exercise Lease term Discount rate Incremental borrowing rate? 14

15 Data extraction and systems

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17 Data collection a project in it s own right! Data extraction plan Data questions Data extraction activities 1. Where is the data held? 2. Completeness of lease population? 3. What data points and what format to collect the data points in? 4. Resourcing requirements? Data collection Project management and tracking Data aggregation Data validation Data cutover 17

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19 Considerations for your IFRS 16 solution Considerations for IFRS 16 solutions Data input/extraction Data validation/identification Contract management Dual reporting (IFRS / USGAAP) Audit trail Internal controls Data output/automated postings Lessee / sub-lease / lessor accounting Deployment (Cloud/SaaS vs. on premise) Integration with existing systems Support Fit for the Future Implementation effort Cost (implementation and going forward) 19

20 IFRS 16 systems things to watch out for Be sure to engage with the right teams within your organisation Cloud versus on site solution Transition accounting Lessor accounting Integrations 20

21 Processes & controls

22 Processes & controls Processes and controls New leases Lease modifications and reassessments Reporting Process to identify new leases Process to input the leases into the system Calculation of discount rates Monitoring of lease renewals and rent reviews Recalculating the lease liability Recalculation of discount rates Journal posting process Reconciliation with payments Process to gather disclosure information Controls and reviews of key accounting judgements Controls and checks of modification journals Controls and checks of the calculation outputs 22

23 Tax perspective

24 Local GAAP remains leading for tax deferred tax Local GAAP in most countries starting point for computation of taxable income - Exceptions may exist! Local GAAP Tax rules Tax Return Netherlands Other countries Deferred tax No changes expected or announced Leasebesluit continues to be in place NL GAAP to allow reporting based on IFRS16 principles - so also relevant for Dutch Tax? Limited activity, but cannot be ruled out that tax authorities take over IFRS concepts! No impact Local GAAP vs. tax books New temporary differences in IFRS vs. tax books Front loaded effect = net deferred tax asset during the lease 24

25 New rules on interest deductions. Dutch implementation of the European Anti Tax Avoidance Directive Net interest costs will be deductible up to 30% of the tax payer s EBITDA Based on tax books! Entry into force: 1 January 2019 EUR 1m net interest costs are always deductible No group escape so no relevance consolidated accounting financial statements (may be relevant in other EU countries!) Is the lease liability a loan for tax purposes? Is the interest element included in the tax definition of interest? Initial conclusions (if IFRS is applied for tax purposes): IFRS16 increases tax EBITDA, so increased ability to deduct interest, But additional interest as a result of the lease liability. Mismatch between finance lease in and operational lease out may result in adverse effects under new provision 25

26 Wrap up

27 Resources Publications First Impressions Transition Options Lease Definition Discount Rates Lease Payments Illustrative Disclosures Media E-learnings IFRS 16 Webinar (Podcast) IFRS 16 Leases website IFRS 16 Update mail IFRS 16 E- learnings 27

28 Thank you

29 KPMG on social media KPMG app 2018 KPMG Advisory N.V., registered with the trade register in the Netherlands under number , is a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative The KPMG name and logo are registered trademarks of KPMG International.