IFRS 16 compliance: Lease Accounting Software vs. Excel

What are the real problems of using spreadsheets for IFRS 16 reporting? There are several significant issues that finance departments run into when using Excel instead of a specialized lease accounting software. 

Summary:  Lease Accounting Software vs. Excel 

The transition from Excel-based reporting to specialized lease accounting software is no longer just a matter of convenience – it is a requirement for audit-ready financial accuracy. While spreadsheets are flexible, they lack the automated indexation, version control, and relational database logic necessary to handle the complex recalculations (like CPI adjustments and lease modifications) mandated by IFRS 16.

9 shortcomings of spreadsheets when complying with IFRS 16:

1. CPI adjustments

Most leases are price regulated at regular intervals. When the payment schedule is changed, it also has consequences for most other figures, such as depreciation. If done in Excel, the finance department must run the calculations all over again. With a sophisticated IFRS 16 software software, CPI adjustments can be done automatically at predetermined intervals with APIs to national price indices.

2. Changes to the scope of a contract

It is always difficult to predict, especially about the future. When the business's growth is higher or lower than expected, it affects lease management and lease terms. It often involves the need to change a lease because the use of the underlying asset changes. Exercise of options is a standard functionality in most lease accounting software. 

3. Document management

A spreadsheet is not an archive. When terms and conditions of a contract changes, how can the finance department be sure the contract at hand is the most recent contract – with the correct payment plan? Instead of calling the person in charge of the contract, finance departments using a lease accounting software can retrieve the most recent contract themselves. It is simply good data management. 

4. Termination and expiration

A spreadsheet is not a calendar and not for document management. Wouldn’t it be useful to be noticed in advance of key dates, leaving room for time no renegotiate prices? Notifications are standard functionality in a user-friendly contract management software. 

5. Multiple entries

IFRS 16 agreements are usually registered in several places, both in ERP/Excel and where contracts are normally registered. In a contract management software with support for lease accounting, all roles related to the agreements enter data into the same system. 

6. Dependency on key personnel

Designing and maintaining a spreadsheet tends to be done by a limited number of people – often just one. There are multiple risks associated with this practice. One is how robust the formulas are. Another is the risks associated with the person leaving the company. 

7. Obtaining the contracts

Listed corporations and other entities using IFRS typically have numerous locations in their home country and abroad. Collecting all the contracts and structuring the data is an arduous task. With a cloud-based lease accounting software, you can have the people with first-hand knowledge of the leasing contracts do the job for the finance department. Yes, you can consider it a contract management software that happens to also fix IFRS 16 reporting.

8. Efficiency and time

IFRS 16 is a challenging piece of regulation – demanding skills and hours to comply with. Using a spreadsheet can only help you with parts of what you know should be automated routines.

9. The auditor bill

With the calculations made in a lease accounting software, the auditor can do random samples and report back, which saves many expensive hours for the company. If finance departments are using Excel, the auditor will need to look into every calculation.

Key takeaways

• Eliminate manual Errors: Automates complex CPI adjustments and lease modifications that frequently break Excel formulas.
• Reduce audit costs: Provides an immutable audit trail, allowing auditors to perform quick spot-checks instead of expensive, cell-by-cell verification.
• Centralize data: Creates a "single source of truth" for all contracts, eliminating operational dependency and fragmented spreadsheets.
• Proactive alerts: Features automated notifications for key dates (renewals/terminations) to prevent missed renegotiation windows.