Overview

IFRS 16 is an international accounting standard that regulates the accounting treatment of leases and has been applicable since January 1, 2019. Its application requires that leases be recognized through a right-of-use asset and a lease liability, which means that the lease is treated similarly to the purchase of an asset financed through borrowing.

The NPS enhancement for IFRS 16 simplifies the creation and tracking of contracts, schedules, and fixed assets in accordance with the standard. This guide introduces the functionalities provided by the enhancement, including:

• Creating a contract as the main carrier of the payment schedule by monthly installments, with a clear distinction between principal and interest.
• Calculating the present value of the schedule for the fixed asset.
• Creating a fixed asset directly from the contract, with a clear indication that the asset is linked to a specific IFRS 16 contract.
• Automatic posting and reversal of monthly schedules.
• Changing the interest rate after a specified repayment period and creating a new version of the repayment schedule under the same contract.
• Creating rent-free or modified installments as defined in the contract.
• Extending the contract term.
• Early termination of the contract.
• Viewing contract statistics, including the present value, outstanding long-term and short-term liabilities, and posted interest and lease expenses.

Each of these functionalities is described in the following sections, in the order you would normally follow them: setup, creating a contract and its payment schedule, posting and reversing installments, recording changes to the contract terms, and reviewing statistics.