A leading retailer with presence in a wide range of locations faced significant challenges in managing its lease accounting under IFRS 16 – compounded by legacy issues and the impact of COVID-19.
Temporary rent arrangements with landlords hadn’t been properly documented or integrated into the lease accounting system, primarily due to operational constraints associated with working remotely during the pandemic. This led to gaps in the retailer’s financial reporting.
The absence of a centralised lease database and incomplete documentation further complicated compliance and decision-making.
Two of our IFRS 16 specialists worked systematically to resolve legacy issues, which spanned up to four years. Our approach included the following:
Reviewing and reconciling lease agreements
Tracking down missing documentation and ensuring all historical arrangements were properly accounted for.
Judgement-based decision-making
Due to incomplete records from remote working, we leveraged payment data to make informed judgements, engaging key decision-makers to validate scenarios.
Enhancing process transparency
Conducting structured sessions with stakeholders to present different accounting treatments where judgement was required, ensuring alignment and authorisation.
Establishing a centralised contracts database provided a structured, reliable system for the retailer’s ongoing lease management.
Our comprehensive review also identified past errors and risk areas, and recommended process enhancements.
As well as resolving past challenges, the work has positioned the retailer with a stronger, more compliant lease accounting framework for the future.
We now also provide ongoing support to the finance director in reviewing monthly lease tasks and embedding a more robust business-as-usual process to prevent future issues.
