About the Authors. Your Shortcuts Might Become Expensive Detours. Dr. Andreas Krueger. Felipe Nogueira

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1 L ea eadmi ni t r a onbynaki a MakeYourDeadl i newi t houtcompr omi i ngqual i t y I FRS16Rapi ddepl oymentgui de naki a. c om

2 About the Author Dr. Andrea Krueger Andrea i a Senior Solution Expert for Leae Adminitration by Nakia in EMEA. Andrea ha been working on IFRS 16 project for major international cutomer ince Felipe Nogueira Felipe i a Senior Functional Conultant for Leae Adminitration by Nakia. He ha led a number of IFRS 16 implementation project for variou major companie all acro Europe. On January 1, 2019 the new leae accounting tandard IFRS 16 will come into effect. The new tandard require all companie to dicloe their operating leae on their balance heet. Companie not yet prepared for the new tandard are likely feeling the preure of looming deadline. With limited time to elect and configure a olution, many organization are opting for a phaed implementation. Under thi approach, organization are able to upload contract data and prepare required quantitative note dicloure, while retaining the option of integrating with their ERP ytem when time permit. Your Shortcut Might Become Expenive Detour The implementation of a olution that ait in compliance with IFRS 16 i a trategic deciion. Applying the tandard will create a ubtantial amount of adminitrative work. It require technical intallation, functional training, and ongoing adminitrative reource to load exiting contract, capture new one, reconcile leae invoice, and handle critical event that happen during the lifetime a leae. When conidering oftware olution that can upport your IFRS 16 initiative, you ll find there are many different type of olution. Firt, there are a number of baic tool, mainly originating from the EPM and BI market, that do not directly integrate with ERP ytem. Thee tool only upport and automate ome part of the leae accounting proce. Typically, they are able to adminitrate leae contract and perform neceary calculation (NPV, IRR etc.). However, they are uually unable to ync directly with external financial application. An ideal olution hould neither be an iolated leae adminitration tool nor a pure booking extenion to a finance tool. Intead, it hould work like a ditinct ubledger for leaing contract, which combine pecial leae adminitration functionality with direct ERP integration. The main reaon for adopting a olution of thi nature i it ability to connect with everal different ERP ytem. Thi flexibility eliminate the need to adopt a different olution for each of the ERP ytem exiting at your organization. Copyright 2018 Nakia Inc. All right reerved. nakia.com 1

3 Adopting an application that directly integrate with your ERP ytem will help to ignificantly decreae Total Cot of Ownerhip (TCO) in the long run. With direct integration, poting can be reflected in your P&L and Balance Sheet automatically, invoice reconciliation can be facilitated more eaily, and finance and controlling ytem can remain updated without manual intervention. Contract modification, termination, index dependencie etc. can be directly reflected in your ERP. On the downide, an integrated olution ha higher initial effort for configuration and implementation. If you are late tarting your IFRS 16 adoption effort, you might feel a though thi i a deal-breaker. A temporary olution, like a elf-made databae, preadheet-baed leae collection, or tandalone-tool, might look like the only feaible olution. However, election of a non-integrated olution could turn out to be a very cotly deciion in the long run. A een time and time again, temporary olution often turn into permanent olution, a migration to a new application require ignificant technical and functional effort. You don t want to find yourelf in a lock-in ituation, where a change of tool or provider i hardly feaible. Thi late in the game, the bet approach i to chooe a olution that can be implemented uing a phaed approach. Standalone technology can help you meet your deadline by treamlining and implifying part of your implementation. It crucial that direct integration remain on your deployment plan o you can benefit from the cot aving and efficiencie aociated with direct integration. Leae Adminitration by Nakia can be deployed in tandalone mode to help you get up and running fater. Rapid deployment i baed on four central pillar: Pillar 1: Starter Kit Leae Adminitration by Nakia can be deployed in tandalone mode. A tarter kit i available to kick-tart your rapid deployment project and allow you tart leae accounting ooner. The tarter kit contain: A ready-to-ue application with functionality to manage leae (baed on our experience with many different organization). A pre-defined ytem configuration for a ample company in tandalone mode. Mater data aociated with thi configuration can be adjuted for your need to treamline the remaining data configuration for your organization. Copyright 2018 Nakia Inc. All right reerved. nakia.com 2

4 Pillar 2: Lean Deployment Option Leae Adminitration by Nakia can be deployed a an on-premie olution. To ave time during the initial application etup, Nakia alo offer a ready-to-ue olution in a Docker container. Thi help to peed up on-premie intallation. If the etup of the neceary infratructure i your bottleneck, you can opt for a cloud-baed deployment to treamline the proce further. Pillar 3: Rapid Deployment Methodology The Leae Adminitration by Nakia tarter kit i the firt tep in configuring and centralizing leae data within the application. With initial focu on meeting your IFRS 16 deadline, we can implify deployment by abtracting data from pecific organizational unit uing a common high-level logic. In thi cenario, proce configuration tay centralized, wherea mater data (e.g. leor, cot center) can be individualized. Thi allow u to populate the central template with data from organizational unit while connecting record to local mater data. Copyright 2018 Nakia Inc. All right reerved. nakia.com 3

5 At thi tage of rapid deployment, the central template i ued and no integration to an ERP ytem i required. Intead, dicloure report are run directly in Leae Adminitration by Nakia. Standalone mode help to treamline the initial implementation by minimizing effort and rik that reult from direct integration with your ERP ytem. Once the data from the central template ha been uploaded into Leae Adminitration by Nakia and ued to produce dicloure report under IFRS 16, direct integration can begin. A tep-by-tep approach i ued to connect Leae Adminitration by Nakia to your ERP ytem. The following tep will be taken to help you realize the long-term benefit of direct integration: For the end uer, the tranition to connected mode hould be a mooth proce and the uer experience hould not be affected. Leae contract data and key parameter will remain unchanged (depending on localization requirement). The tranition to connected mode can be performed tep-by-tep, companyby-company, ytem-by-ytem. Pillar 4: Rapid Deployment Methodology During rapid deployment, it i highly likely that data gathering will become the bottleneck of your implementation. We recommend gathering leae data well before the election of a leae accounting tool. However, we realize that thi i unlikely given the current reality, o we have factored data gathering into our rapid deployment methodology. Two main factor help to treamline data gathering: Agile data tranition and functional-technical training. Copyright 2018 Nakia Inc. All right reerved. nakia.com 4

6 All collected data hould meet the technical interface requirement. However, thi i eaier aid than done. Leae term and condition are not alway eaily broken down in accordance with IFRS 16 logic. For organization with ten of thouand of leae, collecting, calculating, and verifying leae data can be a daunting tak. Data gathering and uploading need to be well defined and tructured. To achieve thi, we compile a et of reference contract from your leae portfolio and compare them againt reference contract we have collected during other IFRS 16 project. Thee reference contract will cover the majority of potential leae complexitie and help u verify the critical data point required for financial calculation under IFRS 16. Once the reference contract are defined, your data collection team i trained on how to tranlate critical contract claue that are hidden in exiting leae agreement into IFRS 16 term that can be added to upload template and ued for technical data tranition. Baed on pat experience, thi tak i extremely time-intenive and hould be planned to tart a early a poible. The tranition itelf i performed in an agile way, i.e. a dedicated ytem i ued to perform a tep-bytep upload and verification of collected data. Once data for your organizational unit have been collected, verified, and uploaded, change to the data can be made directly within Leae Adminitration by Nakia. Switching from Standalone to Connected Mode Central object in Leae Adminitration by Nakia can either be loaded from an ERP or maintained directly within the application. Poting can either be automatically ynced with a connected ERP or tored locally in tranaction data table. The overall input and calculation logic in Leae Adminitration by Nakia doe not change between connected and tandalone mode. Specifically, data that ha been inputted will not be lot. Thi allow u to keep the impact of the witch to a minimum. Uer houldn t notice a difference between connected and tandalone mode. About U A global leader in enterprie buine olution for Organization Tranformation and Accounting & Compliance, Nakia deliver innovative, forward-thinking and robut human reource and financial management olution that advance your buine trategie. Available on premie and in the cloud. Working with a global network of partner and a one of the few Solution Extenion (SolEx) partner of SAP ince 2007, Nakia erve 800+ enterprie cutomer and over 4 million ubcriber in 24 indutrie. Nakia i proud to work with ome of the world mot renowned brand. info@nakia.com Tel: Copyright 2018 Nakia Inc. All right reerved. nakia.com 2