IFRS 16
How a good lease accounting system solves common IFRS 16 mistakes
Many common IFRS 16 mistakes can be resolved with a good lease accounting system. Learn how and why in this article.
A recent study reveals that early IFRS 16 compliance reduces earnings manipulation and improves performance in high-corruption environments.
With the large amount of information readily available to companies in today's connected world, it's difficult to discern the critical information about IFRS 16 compliance from the mass of data and reviews.
In the study “Early compliance with IFRS 16, earnings management, and corruption: evidence from Southeast Asia” by Fuad et al, the researchers analysed 1,071 firms across five countries to understand the impact of early IFRS 16 adoption on financial reporting quality and firm performance. Read on to learn what they discovered.
The key findings
- Reduced earnings manipulation: Early IFRS 16 compliance limits opportunities for earnings management, particularly in environments with weaker governance.
- Performance gains in challenging contexts: Firms in high-corruption settings that adopted IFRS 16 early achieved better performance outcomes.
- Institutional strength matters: Strong governance and robust systems amplify the benefits of IFRS 16 adoption, improving transparency and investor confidence.
Implications for businesses
IFRS 16 is more than a compliance requirement. For businesses that implement it effectively, it can be a strategic lever for financial integrity and operational efficiency.
The success of the implementation depends on systems and processes that ensure accurate lease accounting, governance, and audit readiness.
Early adoption of IFRS 16 can be beneficial for businesses that have the right systems and processes in place.
How LOIS can drive compliance and performance
LOIS Leasing provides an integrated software solution to manage IFRS 16 requirements effectively through:
1. Governance and transparency
- Centralised lease data repository ensures a single source of truth.
- Automated workflows reduce manual intervention and risk of manipulation.
- Full audit trail supports regulatory compliance and internal governance.
2. Compliance automation
- Built-in IFRS 16 calculation engine for Right-of-Use assets and lease liabilities.
- Automated journal entries and reporting aligned with IFRS standards.
- Alerts for contract modifications and reassessments.
3. Performance optimisation
- Advanced analytics for lease vs. buy decisions and cost optimisation.
- Real-time dashboards link lease obligations to profitability and cash flow.
- Predictive modelling for strategic capital allocation.
4. Scalability and integration
- Cloud-based architecture supports multi-entity, multi-currency operations.
- Seamless integration with ERP and financial systems for end-to-end visibility.
Early IFRS 16 compliance improves financial integrity and performance, but only when supported by strong governance and technology. LOIS bridges this gap, turning compliance into a competitive advantage.
Why this matters in an African context
- Enhanced financial transparency: IFRS 16 enforces uniform lease accounting, reducing hidden liabilities and improving investor confidence.
- Strengthening governance: Structured processes curb earnings manipulation and promote accountability in evolving governance environments.
- Attracting foreign investment: Compliance signals reliability, making firms more attractive for cross-border financing and partnerships.
- Driving operational efficiency: Modern systems like LOIS streamline processes, reduce manual errors, and enable better decision-making.
For newer economies, IFRS 16 compliance, supported by LOIS, can be a catalyst for better governance, improved financial quality, and sustainable growth. Get in touch with our team of Chartered Accountants to learn more.