IFRS16 IMPLEMENTING SAP RE-FX FOR LEASE ACCOUNTING. Fredrik Warne Tuomo Repo

Transcription

1 IFRS16 IMPLEMENTING SAP RE-FX FOR LEASE ACCOUNTING Fredrik Warne Tuomo Repo

2 AGENDA Telia Company Introduction to IFRS16 SAP RE-FX key components and solution for Telia Project considerations Lessons learned Summary 2

3 3 TELIA COMPANY PROVIDES COMMUNICATION SERVICES HELPING MILLIONS OF PEOPLE TO BE CONNECTED AND COMMUNICATE, DO BUSINESS AND BE ENTERTAINED. BY DOING THAT WE FULFILL OUR PURPOSE TO BRING THE WORLD CLOSER

4 TELIA COMPANY IN BRIEF RESULT OF A MERGER WITH TELIA & SONERA 2002 THE BEST MOBILE NETWORK IN 5 OF 7 MARKETS 2017 NET SALES SEK 79.9 BILLION IN CONTINUING OPERATIONS HEADOFFICE IN STOCKHOLM MARKET CAP SEK BILLION JULY 2018 TELIA BRAND IN ALL MARKETS 19,600 EMPLOYEES 4

5 FOCUS ON THE NORDICS AND BALTICS 16.8 MILLION MOBILE SUBSCRIPTIONS 2.5 MILLION BROADBAND SUBSCRIPTIONS 2.0 MILLION FIXED VOICE SUBSCRIPTIONS 1.8 MILLION TV SUBSCRIPTIONS #3 Mobile #2 Mobile #4 #2 TV TV #5 Internet #1 Mobile #2 TV #1 Internet #2 Mobile #2 Mobile #3 TV #2 Internet #1 Mobile #1 Mobile (43%) #1 Internet #1 Internet #1 TV #2 TV 5

6 LIKE ALL LARGE COMPANIES, SOME IT LEGACY STILL EXISTS 6

7 IFRS16 FOR TELIA WHAT ARE WE LEASING IN Cars Office space Shops Technical space Ducts Fiber Copper Land 7

8 DIFFERENT TYPES OF LEASE CONTRACTS ACCROSS SEVERAL COMPANIES AND TYPES OF BUSINESSES Legend Office space Shops Land Cars Technical space Copper lease Fiber lease Ducts additional legal entities

9 INTERNATIONAL FINANCIAL REPORTING STANDARDS 9 Source: Pocket Guide to IFRS Standards (214p)

10 INTRODUCTION TO IFRS16 ACCOUNTING STANDARD WHAT WILL CHANGE IFRS 16 becomes effective Jan 1 st, 2019 Lessee shall include all leases on the balance sheet. A lessee is required to recognize an asset for the right to use the leased item and a liability for the present value of its future lease payments. The intent is to have transparency on lease liability obligations on financial statements. Lessee A Contract Invoices B Vendor Lessor The key events for IFRS16 calculations A. Contract commencement B. Vendor invoicing IAS17 Vendor (B) 3200 (B) 3200 Lease Expense Balance Sheet postings Income Statement postings Clearing postings A Asset and Liabilities, SAP RE-FX B1 Liability amortization, SAP RE-FX B2 Interest payment, SAP RE-FX B3 Asset depreciation, SAP AA B4 Invoice posting, SAP VIM RoU Assets Lease Liabilities Vendor Interest Paid Depreciation Cost Lease Clearing IFRS16 (A) (A) (B1) 3200 (B1) 3200 (B2) 1250 (B2) 1250 (B3) (B3) (B4) 3200 (B4)

11 SAP PROVIDES SAP RE-FX (FLEXIBLE REAL-ESTATE) FOR IFRS16 LEASE MANAGEMENT 11

12 CONTENT OF CONTRACT MASTER DATA IN SAP RE-FX Generic information Start and end Termination and extension options Fix term or unlimited? Payment method IFRS16 information Part of IFRS16 valuation? Interest rate Probable end date Value information Lease vs non-lease components Unit prices Indexes and other adjustments Postings information In advance or in arrears? Posting cycle: monthly, quarterly, yearly, once in advance? Invoice based or self-billing? Contract type information Asset class Cost object Other information Notes and memos Reference to scanned copy of signed contract 12

13 HOW IT ALL LOOKS IN SAP RE-FX Contract Objects Contract details: start and end dates extension and termination options Part part of IFRS16 valuation? Contract object details: asset class cost center / WBS Conditions Valuations 13 Contract condition details: lease vs. non-lease unit price start and end dates IFRS16 valuation factors: start dates end dates interest rates

14 BI FRONTEND TOOL SAP ANALYSIS FOR OLAP

15 BI FRONTEND TOOL SAP ANALYSIS FOR OFFICE

16 THERE IS A MAJOR BUSINESS CHANGE IN INVOICE APPROVAL SAP RE-FX does not use Purchase orders and Goods receipt for invoice approval Instead, the lease invoices are matched against approved contract master data Invoice matching is based on: 16 Contract ID on invoice Tolerances A match or match within tolerances is automatically selected and cleared SAP RE-FX is flexible in supporting other contract modelling. Examples: Contract Contract # Lessor John Smith Ab Lessee Telia Company Ab Start date End date Signed date Net Object 1 Lease rent Electricity Object 2 Lease rent Maintenance fee Object 3 Lease rent Maintenance fee Electricity, fixed TOTAL Tolerance outcome Min Max Tolerance configurations Condition type Tolerance Portfolio contracts Lease rent +-1 % Aggregated invoice contracts Lease components have Maintenance fee +- 5% tighter tolerances than Electricity +- 20% non-lease components Electricity, fixed - Invoice Contract # Lessor John Smith Ab Lessee Telia Company Ab Invoice period Due date Net Site1 Lease rent Electricity Subtotal Site2 Lease rent Maintenance fee Subtotal Site3 Lease rent Maintenance fee Electricity, fixed Subtotal TOTAL Periodical contract total with tolerances is matched against the invoice total

17 SAP RE-FX SOLUTION FOR TELIA SUPPORTING BOTH SAP AND NON-SAP COMPANIES Contracts through Excel Customer Master Data Customer Master Data Customer Master Data Customer Master Data Contract system Customer Master Data BP Business Partner SAP ERP AR FI COPA SAP BI PCA BW Cognos Telia Consolidation Cognos Contract system Contract system Object system RE Object Management RE Contract Management VM Invoice Management BCC/ ICC AP GL AA WBS RE-FX Object system Object system WBS Element PS AA Asset Master Data CO Controlling Non-SAP companies GL Legend Group domain Sweden local domain Finland local domain Norway local domain Denmark local domain SAP internal SAP external Manual input 17

18 IFRS16 PROJECT MAIN ACTIVITIES AND TIMEPLAN Q3 Q4 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Pre-study IT architecture and staffing IT prestudy RFP Accounting questionnaires Accounting requirements Accounting Materiality assessment Disclosure requirements Accounting use 1cases 2 Implementat ion Design 1 2 Build PT 1 Train 2 3 UAT Migration Data analysis & design Mock 1 Data collect & cleansing ST SIT RT Mock 2 Mock 3 Migr Post GoLive Support Post Go-Live Support Impl. start Feb 5th GoLive Nov 16th 18

19 LESSONS LEARNED AND SUMMARY ACCOUNTING What is a lease? - Accounting questionnaires and material assessment support in understanding what shall be considered as leases under IFRS16 Telia guidelines - Establishing common guidance on interpreting lease terms and interest rates is important since it has great impact on RoU assets and liabilities Accounting design - Accounting use cases for each IFRS16 trigger will help in deriving the IT requirements CONTRACT DATA Lots of info needed - IFRS16 accounting and disclosures are raising new needs on contract master data System landscape may be messy - Different types of contracts were maintained in different systems, e.g. in contract management systems, contract registries or excel Data capture is time consuming - It is a major activity to capture all the needed contract master data, but it will pay of via renewed business processes and new control points IT COMPLEXITIES New IT system - SAP RE-FX is a new module for Telia and is integrated with many existing SAP modules Impact on other processes - With the IFRS16 solution is impacting on several existing business processes, e.g. contract management and invoice maintenance Change management - IFRS16 also introduces new business processes for contracts, index maintenance, etc. A more centralized and systematic approach requires change management internally and towards vendors, and new roles & responsibilities. 19

20 APPENDIX 20

21 SAP VERSIONS AT TELIA BW on HANA 7.50 SP12 SAP ERP 6.0 Enhancement Pack 8 SAP Invoice Mgmt by OpenText

22 IFRS16 BI CHANGES RE-FX reporting Master data Reports covering contract master data including objects, partners, conditions, terms etc plus business entity repository RE-FX reporting Transactional data Reports covering actuals and forecasts of RE-FX cash-flows (valuation, partner and object) plus actual FI-GL postings RE-FX reporting Disclosures Reports defined to support disclosure requirements where no direct flow SAP ERP SAP BW Cognos exists Existing financial reporting Ensure that existing reporting dimensions are populated as applicable from SAP RE-FX data Update mapping of SAP ERP postings (Asset Accounting and Profit Center Accounting) to appropriate Cognos accounts and forms