Changes to car lease accounting standards – are you ready for AASB 16?

Are you currently leasing a fleet of company cars?

Until recently, Operating Leases were a popular and effective option for a company to operate a fleet of cars. Not anymore!

Like a trusty old ute whose time has come, Operating Leases are about ready for the scrap heap. The benefits they offered are about to wear out — thanks to some major challenges brought in by new accounting standards.

In this blog, I’ll look at exactly what this means for your business.

Effective from 1st January 2019, the Australian Accounting Standards Board (AASB) is set to change Operating Lease accounting as we know it. All through the introduction of a new standard known as AASB 16.

And as this change approaches, internal finance teams will be exposed to challenges beyond just reporting.

The challenges presented by AASB 16

To be frank, a company-owned fleet is already a pain to maintain.

But even if you already accept those challenges, this change is set to have an even bigger impact on your balance sheet.

AASB 16 forces you to recognise the lease asset on your balance sheet, together with the lease liability.

That means new policies and processes must be created and implemented to capture accurate leasing data.  Systems will also have to be modified in order to manage lease strategies, asset turnover and credit ratings.

Ultimately, you’re going to have to do more.

My biggest fear?

That companies will underestimate the cost, time and effort required to transition and act on these changes and not recognise there is a solution available.

So, as if your internal finance team hasn’t got enough on their plate, they need to start preparing for these changes now.

How to adjust to AASB 16 and offer a great Employee incentive

Innovative and savvy businesses will use the AASB 16 change to give their company car program a health check — and look to minimise expenses. Finding ways to keep these company cars from creeping onto the balance sheet should be high on the agenda.

One way to combat the negative affects that AASB 16 will have on your business is to change the company fleet. This is an opportunity to keep everyone happy, Human Resources, Employees, Finance and the ATO.

Because what do you do when that trusty old work ute starts to cost more than it’s worth?

You get rid of it and replace it with something more cost effective and reliable.

Well, Operating Leases are now that old beat-up ute and Novated Leases are the brand new 4×4 multi-purpose Dual Cab!

Novated Leases deliver:

  • Cars fit for purpose, meeting OH&S standards;
  • Marrying work and lifestyle requirements for Employees;
  • Company ownership cost reductions;
  • No balance sheet ramifications under AASB 16; and,
  • Manufacturer and dealer fleet pricing across all brands.

I’ve spoken previously about the benefits of a Novated Lease, both to Employees and Employers. But in short: they solve all your Leasing issues.

I’m already experiencing a growing shift towards Employers utilising Novated Leasing as a preference. It’s proven as the most savvy way to maximise “company car dollars” for both Employer and Employee alike.

Give me a call on 1300 55 1987 to learn how you can join these businesses and become an Employer of choice with an INSIDE EDGE Novated Lease Program

Interested in seeking a Novated Leasing option for your business?

INSIDE EDGE have extensive experience in assisting organisations as they transition from Operating Lease vehicles to providing Employees with a Novated Leasing option. To talk more about how AASB 16 will affect your business, and what you can do to provide your Employees with an alternative option to a company car, give me a call on 1300 55 1987.

Bradley Davidson
Manager – Corporate Sales

INSIDE EDGE – Novated Know How

 

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