Before the discussion began, the staff clarified that it was a question of when the client can actually control the intangible asset, since the client only gets the rights to access the software, not the software itself. A member of the commission asked whether there was indeed a two-step approach, that is, if the client did not control the software, he or she would have to check whether or not he or she would control the rights to access the software. For SaaS settings, the only place you can use the software is in the provider`s cloud. If there is a significant configuration, the software is probably considered an asset that the client controls, as is the situation where the software is downloaded to the client`s computer and the client can run it independently. The Committee reviewed various control indicators, but opinions differed among the members of the Committee. For example, a committee member may not have considered adjustment to be a key indicator of control, since the supplier may concede it to others, although the vendor has provided highly appropriate software; another member of the committee suggested that the exclusivity of the software (i.e. the possibility of prohibiting other customers from using the software) should also be a factor to be considered, but there are differences of opinion that this is not a key factor. Accounting software should be designed to handle all the complexities of IFRS 16 to ensure accuracy and save the company a lot of time. Some of the data features that the software should have include credit interest rate charts, useful practical options and useful life charts. If, based on amounts from previous examples, a company recognizes a commitment to a 5-year software lease with an interest of $50 per year, this would result in EBITDA of $10,000 and a net profit of $9,750. In this example, an asset and liabilities of $1,000 are on the balance sheet to reflect our client`s lease obligation. In the profit and loss account, EBITDA is not affected by the lease as interest and amortization expenses are recorded below the EBITDA line. The transition to new accounting standards, including IFRS 16, will always be complicated.
Businesses will do well to invest in reliable leasing software, instead of helping accounting employees, with countless questions and practical answers from Ifrs 16, to help them change. At Visual Lease, our reliable software makes it easy to transition to new standards. Lease Accounting Software is an application specifically designed to automate reporting for new standards – GASB 87, ASC 842, SFFAS 54 and IFRS 16. The software collects information about a rental agreement such as payment frequencies, rental forms and discount rates, and then performs the calculations necessary to generate the log entries needed to conclude. There is also a software leasing in leasing accounting, which offers the customer a right to use the software as soon as the lease begins.