Adoption IFRS review CoA and SAP RE-Fx for application of IFRS16 accounting standard in lease management.

Challenge

An important international player in the Pharma sector based in Italy, within a project of revision and optimization of its accounting processes, expressed the need to refine and optimize as much as possible the Chart of Accounts and integrate the management of leasing contracts subject to IFRS16, within its SAP S/4HANA management software, using the functionalities offered by the RE-Fx module.

It was also necessary to define a single model applied to Headquarter and subsidiaries.

Solution

The project was segmented into two macro streams, one for the review of the Chart of Accounts and one for the implementation of the Real Estate solution to support IFRS16 accounting standard.

In the first stream, with the objective of reducing the Chart of Accounts globally, the working group pursued the outcome through 3 distinct analysis approaches: 

• Identification of accounts that could be removed/combined regardless of the accounting standards used
• Identification of accounts that already existed within the “corporate” Chart of Accounts but were duplicated at the corporate level during the roll-out of subsidiaries
• Identification of accounts that could potentially be merged into a single accounting nature even if used for local principles

The second stream, which aimed to adopt an E2E solution for lease management under IFRS16, achieved the following results:

• The divestment of the current tool based on the Microsoft Excel application
• The adoption of direct entries in the financial statements, following an analysis of current asset management
• The definition of a single model applied to 16 different companies in 12 countries with different applications of the principle
• The migration of the current database of leases in an automated manner
• The automatic recording of IFRS16 valuations and reclassification of debt accounts 
• The creation of ad hoc reporting (in addition to the SAP standard).
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A system patching activity was also carried out during the project by implementing SAP OSS Notes in order to adapt the environment to the latest features for managing IFRS16 functionality.