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Global And Local IFRS 16 compliance in SAP ERP Core

NNIT helped a life sciences client achieve full compliance with the new International Financial Reporting Standards (IFRS 16). The project was completed well ahead of the regulatory deadline and included both an integrated addition of the client’s SAP solution, training and consulting on new business procedures.​

The implementation of the International Financial Reporting Standards 16, (IFRS 16 Leasing) pose both an organizational and technical challenge for many other organizations.  The new standards mean that companies must change the way they handled the reporting of numerous leased assets, from buildings and cars to lab equipment, in their accounting standards. 

For one of NNIT's life sciences clients, it meant that changes would have to be made to the client's existing SAP solution, and internal accounting procedures would have to be modified, on a Group level as well as on a local level. Reaching the January 1st, 2019 deadline without being fully compliant with the new regulation was not an option.


Short lines of communication

After deciding to enhance their SAP solution rather than go with custombuild software, the client chose NNIT as their implementation partner. This was based on NNIT's extensive SAP experience, the project proposed use of standard SAP functionality and the proposed project model, which used elements from agile project management to ensure close cooperation between the different stakeholders.

  Our project model established developments in Sprints and very short lines of communication between the business owners in the client's corporate finance department, their IT staff and their Finance Center of Excellence. This gave a close teamwork, both on a corporate level and with the system users, which was very effective, says Hans Mathiesen NNIT's project manager on the project.


Getting the foundation in place

To accurately scope the project, NNIT worked closely with the client's IFRS experts from corporate accounting. The changes had a big impact on the reporting and required data collection from all their corporate entities. NNIT helped develop templates to structure the data collection from hundreds of different sources, ensuring that all relevant data was collected in the right format and following a correct process, and updated correctly for the maintenance of the leasing contracts.


A fully integrated solution

Once the process for data collection was clearly defined, the project team identified three different types of leasing contracts that needed to be handled in SAP in their own way:

  • One for buildings

  • One for vehicles

  • One for miscellaneous equipment.

NNIT configured SAP Real Estate and Contract Management system (SAP RE-FX) as a fully integrated solution capable of handling all the contract types, which was then verified by the client's IFRS experts.

– We were able to accomplish our goals using standard SAP elements, with no need for custom developments or integrations. Once the leasing contracts are uploaded, the interest element, the right of use assets are automatically created and capitalized along the corresponding liability. Furthermore, reports such as liability grading and reclassification are delivered as a standard. This requires new accounting processes, but many of them can be automated. From a software perspective, it's a relatively simple task, but it is time consuming for the system and process owners to create and anchor the new way of handling an organization's lease portfolio, says Hans Mathiesen.


Change of scope

In order to ensure that all users were familiar with the correct procedures for using the new system, NNIT carried out extensive training of the client's global finance organization. The process for data input was finalized during the project and in this connection, NNIT's agile project model was put to the test when it became clear that a change of scope was needed.

The issue was that while IFRS 16 is an international standard, individual countries have different variants of adaptation, depending on their local financial and tax laws. This means that the local and regional finance staff's reporting obligations for leasing data would vary from country to country.

– At first, we were looking for an IFRS 16 solution on a group level, but we realized that we would also need to take local variance in legislation into consideration. To avoid putting the burden on local finance, the client decided to centralize, so all data input is handled by their Global Finance Service Center of Excellence. Using this model also means lower license cost, says Hans Mathiesen.


Completed on schedule

Despite the need for scope adjustment and changes in procedures, the project was completed in just eight months, and the client reached full compliance well ahead of the regulatory deadline.


Does your organization need help with SAP?

Book a meeting with Hans Mathiesen at



Hans Mathiesen+45 3077 8774hmti@nnit.comSenior Business ConsultantHans Mathiesen



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