IFRS 16 preparation and powering your balance sheet in times of change

The new accounting standard for leases is happening and it will impact your balance sheet. Want to understand IFRS 16 better and know who can help you on your journey?

The Energy sector is one of constant change and a resulting need to continuously invest in the new. Whether it is balancing returns from traditional power generation with investment in future new energy sources, investment in the power and efficiencies of AI, developing the customer experience and footprint or dealing with an uncertain regulatory environment, there are always competing strategic, tactical and operational demands for capital to be analysed and controlled.

To add to an already complex investment landscape, in 2019 new accounting standard IFRS 16 Leases comes into effect. The new standard will impact the Energy sector by changing the way existing operating leases and certain supply contracts are treated, with P&L costs moving below the line and the balance sheet gaining right-of-use assets and lease liabilities.

The new standard will require significant resource and focus to collate the lease and contract data required to conduct a thorough impactassessment. For companies with large lease and supply contract portfolios, this is likely to be a demanding, time consuming process that may slow – or even stop – certain new investment initiatives until their impacts on the balance sheet in the new world are completely understood.

With every threat comes an opportunity. IFRS 16 will require attention but also provides Energy companies with the chance to take a fresh look at the management and efficiency of their existing asset base. With the right partners and tools, it’s an opportunity to both model the impacts of and correctly implement IFRS 16, while using the new standard’s exemptions to minimise balance sheet drain. Done right, the approach taken to the new standard will minimise disruption to investment programmes, enhance asset management, reduce administration and improve balance sheet efficiency.

Quadrent understands IFRS 16 and has the tools to help you manage the change. Find out by downloading the whitepaper: