PwC’s 10-step approach to lease accounting

PwC has developed a 10-step approach to help you get ready for the new lease accounting standard. Our approach will help you assess the broader implications of the standard and deal with implementing a system, if required.

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How am I affected by the new requirements?

Before getting started on implementation, you need to know everything your company leases. It can be challenging to identify all agreements that need to be assessed given such a structured approach hasn't been required in the past.

Almost all companies enter into lease arrangements, so the new standard will have a pervasive impact, particularly for lessees' leases categorised as operating leases under the old guidance. Recognising new lease assets and liabilities will significantly affect key financial metrics used by investors, analysts and bankers to assess company performance. Examples of affected metrics are  the leverage ratio and earnings before interest and taxes (EBIT).

Highlights for lessees

  • Nearly all leases will come on balance sheet
  • Effective date for June reporters is FY20 (comparatives FY19). Effective date for December reporters will be FY19 (comparative for FY18)
  • Service contracts will remain off balance sheet
  • Short-term leases (less than 12 months) and low value assets (less than US$ 5,000) are off balance sheet

Implementation - it may be harder than you think

  • Sourcing all lease contracts will take time as leasing activity is often decentralised
  • Managing lease contracts effectively will involve significant effort in terms of data collection, data verification and data quality
  • Determining a discount rate based on your incremental borrowing rate can be significantly more complex than it sounds
  • Choosing the right system can be complex and time consuming

How can we help?

To help in your transition and beyond, we've developed the Virtual Accounting Advisor - Leases application for non-audit clients of PwC.

The application comprises four modules that help you to implement the standard yourself (designed to work alongside your chosen calculation tool), and are available together under a subscription model.

Find out more

Contact us

Sean Rugers

Partner - Capital Markets and Accounting Advisory Services, PwC Australia

Tel: +61 2 8266 0309

Gordon Thomson

Partner - Capital Markets and Accounting Advisory Services, PwC Australia

Tel: +61 3 8603 3574

Ian Campbell

Partner, PwC Australia

Tel: +61 8 9238 3276

Katelyn Bonato

Director, PwC Australia

Tel: +61 3 8603 0868

Muhammad Nabeel

Senior Manager, PwC Australia

Tel: +61 (2) 8266 6240

John Costanza

Senior Manager, PwC Australia

Tel: +61 7 3257 5505

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